ORAL ANSWERS TO QUESTIONS

NORTHERN IRELAND

The Secretary of State was asked—

Inward Investment

John Robertson: What assessment he has made of the effect of greater political stability in Northern Ireland on levels of inward investment.

Shaun Woodward: While inward investment is of course a matter for the devolved Administration, both current and future levels of investment from outside the UK depend on maintaining political momentum and demonstrating the strength of political stability in Northern Ireland.

John Robertson: I thank my right hon. Friend for that answer. He is right that the political situation in Northern Ireland is a lot better, but would it not also help if investment on Government projects was directed into areas such as Northern Ireland, so that people could concentrate more on work than on political unrest?

Shaun Woodward: My hon. Friend is right to point to the effects of Government investment, and I am very pleased that the Executive and Assembly in Northern Ireland are making extremely good use of it. I congratulate the First Minister, the right hon. Member for Belfast, East (Mr. Robinson), who is here today, on the work that he is leading in that regard. It may be worth remarking that, this year alone, nearly 43 inward investment projects—in excess of around £800 million, I believe—are being conducted in Northern Ireland.

Peter Robinson: While the Secretary of State rightly draws attention to the fact that the Northern Ireland Executive met their own targets for the last financial year, ending on 31 March, the economic downturn will make things much more difficult in the year ahead. Northern Ireland has a first-class package for inward investment, with a young and well-educated work force and a very good record in innovation, research and development. However, does he agree that the bottom line when he or anyone else has visited America or elsewhere in the world is that people want to know that violence has ended and that there is political stability? The twin evils in respect of getting investment back into Northern Ireland and getting our economy going are those who use the bomb and the bullet to kill and cause bloodshed there, and those wreckers who are attempting to bring down the political institutions.

Shaun Woodward: I congratulate the right hon. Gentleman on the work that he has been doing to inspire leadership in Northern Ireland, and also on what he has done with the Deputy First Minister in the United States to attract inward investment. They have been extremely successful, especially in the current climate. The right hon. Gentleman is also right to point to the impact of the activities of those criminals who call themselves dissident republicans. Again, I congratulate the First Minister and his colleagues on their achievements, which mean that, despite those criminal activities, Northern Ireland continues to be a place that attracts that investment.

Alasdair McDonnell: What discussions, if any, have there been between the national Government here and the devolved Government in Stormont about the spectrum of investment in renewable energies and sustainability? Has there been any dialogue across the border with the Government in the Irish Republic on those issues?

Shaun Woodward: The hon. Gentleman will know that that is a matter for the devolved Administration, but I assure him that the British Government will provide every encouragement to the talks taking place. Anything that I can do in a capacity appropriate to the Secretary of State, I of course stand ready to do.

Alistair Carmichael: Does the Secretary of State agree with New York's Mayor Bloomberg, who said that to attract the level of inward development that he thinks is possible a lot of the physical barriers—the peace walls, the murals, the painted kerb stones and the rest of it—will have to be removed? Will the Secretary of State give his support to those politicians in Northern Ireland who are taking a very brave stand on some of those issues?

Shaun Woodward: I absolutely support all those politicians, and again I commend the leadership jointly offered by the First Minister and the Deputy First Minister on these issues. However, it would be remiss of the House not to record the historic progress that has been made on decommissioning by loyalism in the past few weeks. Again, that achievement is very much the result of a team effort, across the House and outside it. I should like to put on record my thanks to this House for keeping faith with the decommissioning process, which has taken many weapons off the streets for ever.

Laurence Robertson: The Secretary of State and other right hon. and hon. Members, are right to point out that Northern Ireland does stand to benefit from the decommissioning and the peace dividend. However, one problem is that the public sector in Northern Ireland remains disproportionately large, compared with that sector in the rest of the UK. What can the right hon. Gentleman do to change that, bring about greater investment in Northern Ireland and increase the size of the wealth-creating private sector?

Shaun Woodward: This is an interesting moment. The hon. Gentleman is right to point to the concern about the size of the public sector in Northern Ireland, and in normal economic circumstances we would wish to press that issue. However, as he will know, a recession is taking place, and this Government believe that it is right to continue with the investment in Northern Ireland; to do its best for the people there; and to not pursue the Opposition policy of 10 per cent. cuts.

Saville Inquiry

Simon Burns: What his most recent estimate is of the cost of the Saville inquiry.

Shaun Woodward: The cost of the Bloody Sunday inquiry to the end of May is £188 million, including legal costs incurred by the Ministry of Defence.

Simon Burns: Is the Secretary of State aware that legal costs are at just over £97 million, that the inquiry has lasted more than nine years, with 920 witnesses and 433 sitting days, and that the report is expected to be more than 4,000 pages long? Does he accept that for the good of the families and the armed forces, the process should be brought to an end swiftly? When will it be?

Shaun Woodward: It is always interesting to hear Opposition Members talk about inquiries, and expressing concern about the cost and the length of this inquiry. That is why the Government wanted the Inquiries Act 2005 to control costs and the number of years an inquiry takes, and why the Government have been very sensitive to the issues of the Saville inquiry in relation to the families. We must never lose sight of the fact that although the cost of the inquiry is rightly a matter for the House, the value of the Saville inquiry has been inestimable in ensuring that the peace process is successful.

Mark Durkan: Is the Secretary of State aware of the consternation caused to the Bloody Sunday families by some recent words in the House, and can he offer any reassurance in that regard? Can he update us on what further consideration he is giving to the particular needs and rights of families in the context of the publication of the Saville report?

Shaun Woodward: The inquiry is independent, of course, and as such, when it reports is a matter for Lord Saville. He has indicated to me that he still expects that to happen in autumn this year. We should record the fact that everyone in the House shares the hon. Gentleman's frustration at the amount of time the inquiry has taken, and everyone in the House is very sensitive to the families and to the soldiers who were involved in the inquiry. I am making sure—and I will, of course, conduct these discussions with you as well, Mr. Speaker—that when the time for publication comes, we will be very sensitive to the needs of those families and the soldiers.

Patrick Cormack: The Secretary of State will know that the Select Committee is unanimously concerned about both the length and the cost. Can he give the House an assurance that if there ever has to be another major public inquiry, there will be tighter control over the legal costs?

Shaun Woodward: The hon. Gentleman's work on inquiries, and that of his Committee, have been a very important contribution. It is a matter for the House to determine other inquiries and when they take place, but if we want independent inquiries, they must be just that. An independent inquiry will, I am afraid, have to be a process whose length we cannot control. In the end we can try and hold the inquiry accountable for costs, but independence must mean independence. If the hon. Gentleman's wish were to be granted, he would also have to accept some loss of independence, and that may not be what he would want.

Nigel Dodds: On a day when there is renewed concern in Northern Ireland about the amount of money spent by Government on legal costs, does the Secretary of State agree that more needs to be done to cap the costs of legal representation in such cases, because astronomical sums of public money are going into lawyers' pockets? The public in Northern Ireland and across the country are rightly appalled at this level of expenditure. Can he give an assurance that it will be brought to an end?

Shaun Woodward: The hon. Gentleman knows that that was one of the major purposes of the Inquiries Act 2005 and why we wanted other inquiries that are taking place to do so under the Act or to convert to the terms of the Act. The hon. Member for West Chelmsford (Mr. Burns) referred earlier to the almost £100 million that has been spent on the legal costs of the Saville inquiry. That is a genuine issue of real concern to the House, but we must recognise that those who advocate open and public inquiries also have to come to terms with the fact that many people who come before such inquiries will want legal representation. Although we will try to bear down on the costs of legal representation, as we have done through the Inquiries Act, we cannot deny people fair representation and justice.

Equality Issues

Graham Allen: What plans he has for the transfer of responsibility for the equality issues within his portfolio to the Northern Ireland Assembly; and if he will make a statement.

Paul Goggins: The vast majority of equality and anti-discrimination matters are already within the legislative competence of the Northern Ireland Assembly. We have no current plans to devolve any of the remaining reserved equality issues, but would be happy to consider doing so if requested by the Assembly.

Graham Allen: Would the Minister consider it to be in the spirit of the Good Friday agreement, and the spirit of equality, for both Her Majesty's Government and the devolved Assembly to continue to ensure that children receive a similar education and are not separated, if not at birth, then at the age of four or five, into religious groups, and learn tribal loyalties, rather than a loyalty to humanity?

Paul Goggins: I know that my hon. Friend has a long-standing interest in, and commitment to, integrated education in Northern Ireland; he has raised the issue on many occasions. He rightly points out that equality, and a commitment to equality, was at the heart of the Good Friday agreement. It paved the way for the great progress made in Northern Ireland in recent years. One of the products of that progress is that many matters are now devolved in Northern Ireland, including responsibility for education, so I hope that he will forgive me if, on this occasion, I pass and leave it to others to comment on those issues.

Gregory Campbell: I suppose that it should be said—I hope that the Minister agrees—that state schools in Northern Ireland do not encourage tribalism.
	Leaving aside the as yet undetermined date for the transfer of policing and justice powers, what more rapid progress can the Minister secure to bring about an equitable situation regarding recruitment to the police in Northern Ireland, so that everyone, irrespective of their religious background, has an equal opportunity, and so that merit is the only consideration in such recruitment?

Paul Goggins: I know that the special provisions in place for recruitment to the Police Service of Northern Ireland are a matter of some controversy, and I know that the hon. Gentleman has very strong views on them. However, he will recognise that when Patten reported, only 8 per cent. of serving police officers in Northern Ireland were from the Catholic community. I can tell him that the figure is now more than 26 per cent. That is a huge change, and it means that the Police Service of Northern Ireland more fairly reflects the community that it serves. We are absolutely committed to disapplying the special provisions that are now necessary when we reach the target of 30 per cent., and recruitment will then proceed in the normal way.

Crime Detection

Bob Spink: What the rate of detection of crime by the Police Service of Northern Ireland was in the latest period for which figures are available.

Paul Goggins: The clearance rate in Northern Ireland for 2008-09 was 23 per cent.—an increase of 2.5 percentage points on the previous year. Importantly, there has been an increase in clearance rates for some of the most serious crimes committed, including murder and attempted murder, as well as serious sexual offences.

Bob Spink: I welcome that answer. I congratulate the Police Service of Northern Ireland on its detection rate for serious crime, but the Minister is aware that low-level crime and antisocial behaviour continue to increase. Will he resist any move to disband the full-time reserve, and will he ensure that we get more front-line policing, and a greater high-visibility police presence on the street?

Paul Goggins: There is absolute commitment from the Policing Board and the Chief Constable in Northern Ireland to making sure that we get as many police officers on to the streets as possible. There is a huge commitment to neighbourhood policing. The hon. Gentleman mentions the full-time reserve; I pay warm tribute to all those who have served in the full-time reserve in Northern Ireland. They have done a heroic job over many years. However, the Chief Constable recently reaffirmed his decision to continue to disband the full-time reserve. There are currently 180 full-time reserve officers on the front line. The Chief Constable has given a clear commitment that all their responsibilities, and all the cover that they provide, will be filled. He has given a categorical assurance on that, and he certainly would not compromise the safety of his officers.

Eddie McGrady: In spite of the Minister's welcome statistics regarding the detection and resolution of crime, is he aware that the community in Northern Ireland, generally speaking, is frustrated by the failure to prevent and detect antisocial behaviour and low-level crime? Is he also aware that there was a scheme afoot to provide police community support officers? Such a scheme is essential to the resolution of crime, as well as a vital outstanding matter from the Patten review of policing. That scheme was frustrated by the failure in 2007 to provide the funding. Will he now provide that funding?

Paul Goggins: The Police Service of Northern Ireland received a very good budget for the comprehensive spending review '07 period—a budget that enables it to retain a police force of 7,500 regular officers. The hon. Gentleman made a point about police community support officers. I can tell him that I see the benefits of PCSOs every day in my constituency, and I look forward to the day when the Policing Board and the Chief Constable in Northern Ireland decide to commit to PCSOs. The hon. Gentleman is right about the need to deal with antisocial behaviour, and yesterday I had the great pleasure of launching the "summer splash" scheme in Northern Ireland, in which young people up and down Northern Ireland will be given positive activities to do during the summer months, so that they do not engage in antisocial activity.

Owen Paterson: The recent incident at Lisnaskea shows that, to improve crime detection rates, it is essential that republican and loyalist paramilitaries be put out of action for good. The recent loyalist decommissioning is highly significant and vindicates the position that we took on decommissioning legislation. However, a number of loyalist groups are still engaged in serious criminality. How does the Minister intend to reduce their activities?

Paul Goggins: Again, I join my right hon. Friend the Secretary of State in welcoming support from other parties in this place for the provisions that this Government introduced to extend the decommissioning amnesty period. That has paid off, we have now seen further decommissioning and we should all take heart from that. However, the hon. Gentleman is quite right: people associated with paramilitary organisations are still engaging in criminal activities. They will be dealt with by the police and by the agencies that form the Organised Crime Task Force in Northern Ireland, and that work goes on apace.

Owen Paterson: The misery inflicted on the whole community by loyalist groups is wholly unacceptable. Does the Minister agree that, in order to cut crime and increase detection rates, he needs to maintain unrelenting pressure to force them to end all their illegal activities, disband their command and control structures and give their unconditional support to the PSNI?

Paul Goggins: I again make the point that the police are at the forefront of the drive against crime, and they can do their job only if they are properly resourced. This Government have provided those resources, and we certainly would not implement 10 per cent. cuts in the funding of the Police Service of Northern Ireland.

Chris Ruane: Despite the alleged increase in crime on which the hon. Member for North Shropshire (Mr. Paterson) is trying to campaign, and despite 40 years of war and conflict, Northern Ireland has the highest points on happiness as against income in the whole British Isles. Will the Minister find out the essence of that happiness in Northern Ireland, bottle it and send it across to the rest of the British Isles?

Shaun Woodward: It is the leadership from the Northern Ireland Office.

Paul Goggins: My right hon. Friend comments from a sedentary position that leadership from the Northern Ireland Office is probably largely responsible.
	That is an interesting question, however, and from my own observations over the last three years while serving in Northern Ireland, I should say that what is so important is the sense of community and identity. In the past, those things have played into the hands of conflict, but as we make progress I see them as great strengths that reassert the importance and solidarity of community life in Northern Ireland.

Immigrants (Attacks)

Philip Hollobone: What recent reports he has received of attacks on immigrants in Northern Ireland; and if he will make a statement.

James Duddridge: What recent reports he has received of attacks against the immigrant population in Northern Ireland.

Shaun Woodward: These attacks in Northern Ireland are wholly to be condemned. Fortunately, it now seems that they were a relatively isolated set of incidents, and the House will wish to know that three people have now been charged with serious offences.

Philip Hollobone: Why were the police not more aware of the simmering tensions with the Romanians in the local community? Does that not underline the importance of getting effective community policing up and running in Northern Ireland?

Shaun Woodward: With respect, I think that the Police Service of Northern Ireland does an extraordinarily good job in protecting the community in Northern Ireland, and I caution the hon. Gentleman against using the incident to draw a general point. That being said, we should acknowledge that the police said that they did not know enough about the Romanian community at the time. Of course, they are looking at the matter, however, and I am again pleased to report that it looks as though it was an isolated set of incidents.

James Duddridge: Margaret Ritchie, the Northern Ireland Minister with responsibility for housing, was saddened by the attacks, but not surprised. In light of that, does the right hon. Gentleman anticipate any more attacks, and what provisions have been made against that eventuality?

Shaun Woodward: All of us were extremely disappointed that the attacks took place. I draw the hon. Gentleman's attention to the fact that every political leader, led again by the First Minister and Deputy First Minister, condemned the attacks. Regrettably, there can be intimidation in any community, but let us be clear: race attacks should be condemned, wherever they take place.

David Taylor: Does not what happened show that parts of Northern Ireland are still deeply divided and segregated, including the divided communities in Belfast? What is the Secretary of State doing to encourage all Departments across the spectrum to develop the framework of "A Shared Future" and an integrated society in Northern Ireland, so that the process of reconciliation and healing can begin and the community can become genuinely welcoming to people from outside its borders?

Shaun Woodward: As the investment made from the United States indicates, Northern Ireland today is a genuinely welcoming community. My hon. Friend referred to the need to continue to build on "A Shared Future"; the First Minister is here today, and I know that he very much believes in that. But let us be clear. The best way in which we can build a shared future is to complete stage 2 devolution of policing and justice— [Interruption.]

Mr. Speaker: Order. A lot of private conversations are taking place, and frankly the decibel level is too high. That is unfair to the Member asking the question and to the Minister answering it.

William McCrea: Does the Secretary of State agree that, whether a person is an immigrant or from the indigenous population in Northern Ireland, all threats, intimidation and murder, whether emanating from a person within the Northern Ireland community or from dissident republicans in Northern Ireland, must be condemned and stopped?

Shaun Woodward: I welcome the hon. Gentleman's comments. Of course such things must be condemned and stopped, and we all have a duty to make that happen. The best example that we can now give the people of Northern Ireland is to ensure that stage 1 devolution continues to work and delivers for people and that we show, sooner rather than later, that the politicians of Northern Ireland can share the responsibility for policing and justice as well.

Bill of Rights (Public Consultation)

Jo Swinson: When his Department plans to begin a public consultation on the proposed Bill of Rights for Northern Ireland.

Paul Goggins: The Government are currently considering the Northern Ireland Human Rights Commission's detailed proposals. We aim to publish a consultation paper after the parliamentary summer recess.

Jo Swinson: I thank the Minister for that reply. Given that polls show that three quarters of people in Northern Ireland, from all sides of the community, think that a Bill of Rights is important for the future, will the Minister, after the consultation, commit to allowing sufficient parliamentary time to deliver on that vital part of the Good Friday agreement?

Paul Goggins: Before we consider the issue of parliamentary time, we need a proper consultation on the proposals made by the Northern Ireland Human Rights Commission. As the hon. Lady will know, it provided us with a 200-page document with some 80 recommendations. We are considering all of them very carefully indeed. I look forward to the public consultation that will follow later in the year.

Jeffrey M Donaldson: The Minister will be aware that there is widespread concern, particularly in the Unionist community, about the proposals in the draft Bill of Rights. Unionist parties, Unionists on the Northern Ireland Human Rights Commission and the Protestant Church leaders have made clear those concerns. Will the Minister assure the House that the Government will not proceed with the Bill of Rights as it is currently drafted and that they will go back to consult the community and take on board the genuine concerns held by many people in Northern Ireland?

Paul Goggins: I acknowledge that there are many views on the issue, and many views have been expressed. There was, however, one report from the Northern Ireland Human Rights Commission; we have received it, are considering it and will consult on it. However, I offer the right hon. Gentleman the absolute reassurance that he and all people in Northern Ireland will have the opportunity to comment on and be part of that consultation.

Equality Commission

Philip Davies: What recent discussions his Department has had with the Equality Commission for Northern Ireland on its review of the effectiveness of section 75 of the Northern Ireland Act 1998.

Paul Goggins: The Northern Ireland Office contributed to the Equality Commission's consultation process during its review of the effectiveness of section 75 of the Northern Ireland Act 1998. Copies of the report were placed in the Libraries of the House on 9 June.

Philip Davies: Having recently had discussions with elected politicians in Northern Ireland who find section 75 to be a bureaucratic, institutionalised piece of political correctness, I ask the Minister to consider repealing the provision instead of encouraging such politically correct box-ticking, which does nothing to improve community relations in Northern Ireland.

Paul Goggins: Why did I think that the hon. Gentleman might use the phrase "political correctness"? I ask him to reflect for a second on the importance of the commitment to equality and fairness in Northern Ireland in the context of the past 10 years. Putting equality and fairness at the heart of the political and public policy-making agenda is absolutely essential to ensure that peace takes the place of violence and sectarian hatred.

Sammy Wilson: While the Secretary of State emphasises the importance of fairness and equality being at the heart of affairs in Northern Ireland, does he accept that the legislation as currently drafted has led to an extensive and unnecessary piece of equality legislation that has led in turn to the build-up of an equality industry that serves few of the purposes that he outlined in his answer, and that therefore any future legislation should be designed to dismantle that industry while ensuring that the principles of fairness and equality remain?

Paul Goggins: I do not accept or recognise the description that the hon. Gentleman has given. There is a commitment to equality; indeed, there is an absolute responsibility on public authorities to consider all their policies in relation to equality. Where it is felt that there might be an adverse impact, an equalities impact assessment should be provided. The important thing, as the Equality Commission has recognised, is not the process but the practical outcome in terms of the lives that people lead. I hope that in future we will focus on those practical outcomes more than on anything else.

PRIME MINISTER

The Prime Minister was asked—

Elderly People (Long-term Care)

Malcolm Wicks: What the Government's policy is on the funding of the long-term care costs of elderly people.

Harriet Harman: I have been asked to reply.
	Before I take my right hon. Friend's question, I am sure that the whole House will wish to join me in sending our sincere condolences to the families and friends of the servicemen killed in Afghanistan in the past week. They were Lieutenant-Colonel Rupert Thorneloe, commanding officer of 1st Battalion the Welsh Guards; Trooper Joshua Hammond of 2nd Battalion the Royal Tank Regiment; Lance-Corporal David Dennis of the Light Dragoons; Private Robert Laws of 2nd Battalion the Mercian Regiment; Lance-Corporal Dane Elson of 1st Battalion the Welsh Guards; Captain Benjamin Babington-Browne of 22nd Engineer Regiment, Royal Engineers; and the soldier from the Light Dragoons who was killed in Helmand province yesterday. We owe these men, and all those who have lost their lives in service, our deepest gratitude. They served our country and the people of Afghanistan with distinction in desperately difficult conditions ahead of the very important August presidential elections in that country. They will never be forgotten.
	I hope that the House will understand if I take a moment also to offer my condolences to the families and friends of those killed in the fire in Camberwell on Friday.
	In answer to my right hon. Friend the Member for Croydon, North (Malcolm Wicks), the Government plan to publish a Green Paper on care and support shortly.

Malcolm Wicks: I know that all Members offer their condolences to the families who have suffered such terrible losses in Afghanistan—those brave men—and also closer to home in my right hon. and learned Friend's own constituency.
	Given that the cost of care associated with the ageing of our already elderly population is in many respects an unfinished chapter in the history of the modern welfare state, and that it affects many families in Croydon and in all our constituencies, does the Leader of the House agree that we now need quickly to develop a robust social policy that will allow the spreading of risks and costs?

Harriet Harman: I very much agree with my right hon. Friend who, ever since he was at the Family Policy Studies Centre, has drawn the House's attention to these issues. With an ageing population, the number of those over 85 is set to double over the next two decades. This is a major challenge for families and for the Government. We will bring forward a Green Paper that will have the objective of ensuring that there is independence and choice in the provision of services, that the highest quality of services is available to everybody, and that those services are affordable for the individual, for the families and for the public purse.

Stephen Dorrell: May I associate myself with the remarks that the right hon. and learned Lady made about those who have lost their lives in Afghanistan and in Camberwell?
	Is not the Government's policy on the funding of long-term care accurately summarised as being to procrastinate and to delay? Can the right hon. and learned Lady confirm that Tony Blair promised action on this subject to the Labour party conference in October 1997? Since then, we have had the Wanless review, we have had a zero-based review, we have had several comprehensive spending reviews, and we have had a royal commission—but we have had no action. When will the Government deliver the action that the then Prime Minister promised 11 and a half years ago?

Harriet Harman: This Green Paper will be a very important next step, but it is not true that we have taken no action. Since we have been in government, we have recognised the importance of family care and those who go out to work as well as care for older relatives. That is why we brought in the right to request flexible working for those who care for older relatives—that is action. That is why we have increased resources for the health services for the many older people who need health care support. That is why we have increased resources for social services, so that there is domiciliary care available to people who remain independent in their own home as well as social services residential care. Yes, we will take further steps and we will consult on the challenges ahead, but it is absolutely not true to say that we have made no progress over the past 10 years. We have.

Linda Gilroy: I join in offering condolences to those who have lost their lives at home and abroad, particularly Trooper Joshua Hammond, who has a very large family in Plymouth mourning his loss. My constituency is home to a large number of hard-working public sector workers—cleaners, cooks, health care workers and administrators. Public sector workers have an average pension of £7,000 a year. Does my right hon. and learned Friend understand their anger and concern when those rather modest pensions, and indeed their modest pay, come under attack as being somehow unfair or unreasonable?

Harriet Harman: I agree with my hon. Friend. We are strongly committed to public services and to the work that public servants do, particularly those who work hard, often for very modest incomes, and we make no apology at all for public service pensions remaining an important part of the remuneration package of public sector workers.

William Hague: On behalf of the Opposition, may I also send our condolences to the families of the six people, including a three-week-old baby and two other children, who died in such tragic circumstances in Camberwell, in the right hon. and learned Lady's constituency, on Friday evening? That event was deeply distressing to her constituents and the whole country.
	I join the right hon. and learned Lady, of course, in paying tribute to the seven servicemen who have been killed in Afghanistan in the past week: the soldier from the Light Dragoons killed on Tuesday; the soldier from the Royal Engineers killed on Monday; Lance-Corporal Dane Elson; Lance-Corporal David Dennis; Private Robert Laws and Trooper Joshua Hammond, who were both aged just 18; and Lieutenant-Colonel Rupert Thorneloe, who was the commanding officer of the 1st Battalion the Welsh Guards.
	Given those casualties, should we not particularly remember this week that our forces deserve our gratitude and admiration? Are the Government satisfied that everything possible is being done to provide the best possible protection and mobility for our forces there, including the earliest possible increase in the number of helicopters and armoured vehicles?

Harriet Harman: The right hon. Gentleman is absolutely right to say that we must do everything possible to ensure the greatest protection for our troops in the field, and there is no complacency about that. We have increased the number of armoured vehicles that have been procured for and made available to our troops, but we are not going to be complacent and there must be more. We have increased the number of helicopters by 60 per cent. over the past two years, but we recognise that we should do more. We want to do more not only for their personal protection but in recognition of the importance of their mission in Afghanistan, not only to that country but to the region and to the security of this country.

William Hague: We all recognise that it is important to do more, and we will hold the Government to the commitments that the right hon. and learned Lady has made.
	Moving on to Government policy more broadly, will she put into plain English for everyone the Prime Minister's assertion last week that
	"total spending will continue to rise, and it will be a zero per cent. rise in 2013"?—[ Official Report, 1 July 2009; Vol. 495, c. 294.]

Harriet Harman: The right hon. Gentleman will know that all the figures are set out in the Budget book. Our commitment is clear: we are making public investment now to help to back up the economy, get through the recession and ensure that it is shorter and shallower than it would otherwise be. That means backing businesses, protecting people's jobs, helping the unemployed and ensuring that people do not face repossession. We are taking action. The right hon. Gentleman wants to concentrate on numbers to avoid facing up to the fact that the Opposition have proposals to cut public investment now— [Interruption.] They have proposals to cut public investment this year, just when the economy needs investment most. I understand that the shadow Chancellor revealed last week that he spends 40 per cent. of his time thinking about economics. It is amazing that he spends 40 per cent. of his time thinking about doing absolutely nothing.

William Hague: Perhaps the Leader of the House could spend 100 per cent. of the next minute trying to answer the question she was asked about what the Prime Minister meant by a "zero per cent. rise". Is it not now clear that every single word of the assertion that he made last week is wrong—that total spending will not rise, and there will not even be a "zero per cent. rise", as he bizarrely called it, in 2013, but that the figures in the Government's books, which the Leader of House mentioned, show that there would be a fall? As so many supporters of the Government are now calling for honesty about spending, should she not find it in herself to do what the Prime Minister refuses to do: admit the facts of the Government's figures? Will she come down on the side of reality and say that, on the Government's figures, total spending is set to fall?

Harriet Harman: Our honest and committed view is that we need to invest now to back up the economy, not only to protect individuals, who have worked hard to build up their businesses, but to ensure that the situation is not worse in the longer term. How telling it is that the Opposition want only to talk about figures in five years' time to distract attention from the action, which they do not support, that we are taking now.

William Hague: There is no need to talk about the figures in five years' time as the Government's figures show that capital spending will fall from £44 billion this year—and fall every year—to £22 billion in four years. Is it not an indisputable fact that capital spending is being halved?

Harriet Harman: I think the right hon. Gentleman knows full well that the reason for the figures is our bringing forward capital spending. We are not cutting capital spending—we have increased it and we are bringing it forward because, given that, for example, the private sector construction industry is facing dire times, we think it right to bring forward capital investment in public construction, not only for the sake of the children's centres, schools, hospitals and homes that will be built, but for the jobs that that will create. The truth is that there is a big distinction: while we are investing in bringing forward that capital investment, the Opposition would pull the plug on the public sector just when the private sector is struggling.

William Hague: The Leader of the House's statement "We are not cutting capital spending", when the Government's figures show it declining from £44 billion to £22 billion, is exactly the sort of statement that damages the credibility of politics and the Government. It is no wonder that they are abandoning their numeracy strategy when Ministers will not admit that 22 is half of 44. Is the right hon. and learned Lady aware that figures from the Institute for Fiscal Studies show that capital spending from 2013 as a proportion of national income would be below the average for the whole 18 years of Conservative Government? That is the capital spending that the Government intend to deliver. Is it not also true that, on the Government's figures, the huge increase in debt interest and the rise in unemployment mean it is an indisputable fact that their projections lead to departmental spending falling heavily in the next few years? Why can she not admit the facts?

Harriet Harman: The right hon. Gentleman mentioned capital spending, and I have made it clear that we are bringing it forward. He also mentioned unemployment, and we are taking action to protect people's jobs. Unemployment would be growing if we had made the cuts that he is suggesting. When it comes to the estimates on unemployment, our estimate is that if we had not taken the action that we have taken to back up business and protect people's jobs, 500,000 more people would have lost their jobs. Once again, he talks about figures in 2013 and 2014, but the action that we are taking now will ensure that the public finances are in a better position, because we will prevent the recession from being deeper and longer.

William Hague: If the right hon. and learned Lady believes that capital spending is not being cut and that unemployment is not growing, it is no wonder the Government are so deeply out of touch with the people of this country and with the condition of the economy. Is it not the case that any Government elected at the next election will inherit public finances that are in an unbelievable mess, after 12 years of a Prime Minister who spent everything in the boom, who thought that the bust would never occur and who believed that he had abolished the economic cycle? Now capital spending is being cut, total spending is being cut and departmental spending is set to be cut. Those are the Government's own plans. Are those not Labour cuts being brought in by a Labour Chancellor that have been made necessary by the actions of a discredited Labour Government over the past 12 years?

Harriet Harman: We have rebuilt hospitals over the past 10 years. We have rebuilt schools. We have paid down debt and we are now facing the challenge— [ Interruption. ] Yes—

Mr. Speaker: Order. I apologise for interrupting the Leader of the House, but there is simply far too much noise. Right hon. and hon. Members need to calm down.

Harriet Harman: And yes, we have paid down debt, so that we have the second lowest debt in the G7. We are responding to the challenge of this recession. The truth is that it is the Opposition who are embarrassed about their past, who are failing to face up to the challenge of the present and who have nothing to offer the future.

Des Browne: May I associate myself with the words of condolence for the brave and professional soldiers who have given their lives in Afghanistan over the past week, as well as those who so tragically lost their lives in that dreadful incident in my right hon. and learned Friend's constituency?
	Thousands of people in Scotland, along with civic society, the Churches, East Ayrshire council, the Scottish Government and Scottish Enterprise, have joined in supporting the work force in my constituency at the Johnnie Walker plant in Kilmarnock—700 of them—and those who work in the distribution plant owned by Diageo nearby. We have also been joined by Members from all parties in Scotland. Will my right hon. and learned Friend join us in seeking to persuade Diageo not to discard two centuries of loyal, hard-working and profit-making contributions to its business in the name of improved shareholder value and will she pledge Government support for that campaign?

Harriet Harman: I know that my right hon. Friend the Secretary of State for Scotland is meeting the chief executive of Diageo today, and he will be urging him to think again about the proposed closure of its Kilmarnock plant, as my right hon. Friend has requested. The announcement is very bad news for the workers and their families and will be a body blow to Kilmarnock. My right hon. Friend the Secretary of State will be seeking an assurance from Diageo that it will commit to looking seriously at alternative options that the workers and Scottish Enterprise come up with.

Vincent Cable: May I add my condolences to the families of the seven brave servicemen who died in Afghanistan and to those of the victims of the Camberwell fire?
	In welcoming the Minister back to her temporary job running the country, may I express the hope that when she was briefing the Prime Minister for talks with his friend Signor Berlusconi, she remembered to enclose an Italian translation of her progressive views on gender equality?
	My question is about public sector pay. How do the Government expect low-paid public sector workers, whom the right hon. and learned Lady has rightly just defended, to accept restraint in an environment where the Government are allocating to senior management—senior civil servants—large salaries, generous pensions and very large bonuses, averaging £10,000 a head?

Harriet Harman: We have made it clear that we expect to see restraint at the top of the public sector. It is important in difficult times that those in a leadership position in the public sector take their responsibilities seriously and set a good example.

Vincent Cable: But that does not address the basic principle. Why is it that two thirds of all senior civil servants expect to receive bonuses in order to get out of bed in the morning, on principle? May I also address the issue of the most highly paid public servants—namely, those who work in the publicly owned and guaranteed banks? Why do the Government simply not stop bonuses being paid within those banks? They are publicly owned banks, owned by the taxpayer. Why do the Government not simply say no?

Harriet Harman: The Government have made it very clear indeed that we want to see an end to recklessness whereby people have enriched themselves while gambling with other people's money and given themselves big bonuses as a reward for failure. We have made it clear that we expect action from the Financial Services Authority, and the Chancellor will be making a statement about that shortly.

Natascha Engel: Until very recently, I had the great honour of being a trustee of the much-respected UK Youth Parliament, which has been working hard on bringing together proposals for a consultation that will reach about 1 million young people aged between 11 and 18. The consultation will seek their views on politics and democracy. Will my right hon. and learned Friend help me to support the UK Youth Parliament in getting this important consultation out, to ensure that the project is as successful as all of us here need it to be?

Harriet Harman: I agree that we need to do everything we can to increase the involvement of young people in politics, and I congratulate my hon. Friend on her consistent work on this issue. It is very important that, at last, the House has decided that, when the House is not sitting, the UK Youth Parliament can use this Chamber. You never know—when we see how it conducts its proceedings, we might even learn something from it!

Andrew George: Cornwall has been satisfying the Government's house building strategy by growing faster than almost anywhere else. In fact, it has more than doubled its housing stock in the past 40 years, yet the housing problems of local people have got dramatically worse over that time. Rather than grinding on with another 20 years of a failed strategy that has turned Cornwall into a developers' paradise through building unaffordable housing, will the Government give Cornwall the power to concentrate on meeting the now desperate need of local families?

Harriet Harman: We want to ensure that the hon. Gentleman's county of Cornwall has not only the power but the resources to ensure that there is more affordable housing for rent and for people to buy. That is why, in the Budget this year, we announced nationally a further £400 million to provide 9,000 more homes to rent or to buy. In "Building Britain's Future", which we announced last week, we put forward a further £1.5 billion over the next two years so that we can have 20,000 energy-efficient affordable homes for young families—some of which, I am sure, will come to Cornwall.

Anthony D Wright: On Monday, while some Conservatives were celebrating the 20th anniversary of the ending of the dock labour scheme—with Lord Fowler, the architect of that legislation, as their guest speaker—11 of my dock workers were being told that their jobs were ending owing to the casualisation of the port. This is happening despite the fact that Lord Fowler, when he was a Minister in this House, gave an assurance that the legislation would not result in a return to casualisation. Will my right hon. and learned Friend join me in encouraging the employers to return to the negotiating table to secure the future of the port dock labour scheme in Great Yarmouth so that we can ensure continued employment for the future?

Harriet Harman: I know that my hon. Friend fights hard for the dock workers and for the industries that are dependent on the docks in his constituency. I will raise this matter with Ministers in the relevant Departments and ask them to meet him to discuss taking the matter forward.

John Maples: The seven soldiers killed in Afghanistan, whose names the right hon. and learned Lady gave us at the start of Prime Minister's Question Time, bring to exactly 170 the tragic total of those killed in Afghanistan since 2006. Many people in my constituency are starting to doubt the wisdom of this war and I wonder whether she could remind the House of precisely what our military objective in Afghanistan is.

Harriet Harman: The hon. Gentleman makes a very important point. We do not want anyone to be in any doubt about the importance of this mission in Afghanistan. It is important to ensure that in the mountainous regions surrounding Afghanistan and Pakistan, we do not have a crucible for the development of terrorism, which threatens people not only in those countries but in the wider region and, indeed, the whole world. This mission is also important for the education of people in Afghanistan. There are now 6 million children in school in that country, compared with only 1 million in early 2001. Our troops have paved the way, working with other international forces, to make that possible. They are paving the way for economic development and a more secure democracy as well as security in the region and the world. We want to make it clear to our soldiers, their families and the people of this country that we have no doubt about the importance of the mission in Afghanistan.

Lindsay Hoyle: My right hon. and learned Friend will be aware that hard-pressed families and businesses alike are struggling to pay the price of fuel at the pump, which has gone up substantially. Will she look to have a conversation with the Prime Minister and the Chancellor to see if she can scrap, or at least defer, the 2p duty increase that is due in September?

Harriet Harman: There is real concern about the increase in fuel prices—not only the cost of petrol at the pumps, but its effect on people in their homes and on businesses. We want to make sure that there is fairness, that people are protected from the price rises, that there is proper transparency and that help is available for those who struggle to make ends meet.

Daniel Kawczynski: More than 300 Members of Parliament have signed an early-day motion on Equitable Life, which seeks justice for Equitable Life policyholders. The vast majority of those MPs have joined the all-party group for justice for Equitable Life policyholders, which I chair. Unfortunately, Sir John Chadwick, who has been appointed by the Government to review the compensation scheme, refuses to come before us to interact with us, so will the right hon. and learned Lady use her good offices to ask him to reconsider in order for him to be accountable to us and through us to the British people?

Harriet Harman: We all strongly believe that there should be justice for the Equitable Life policyholders who have fallen victim to mismanagement stretching back to the '80s and to a failure in the regulatory system for which the Government have apologised and recognised the need to set up ex gratia compensation. In order to establish how we should do that, following the ombudsman's report, we have asked Sir John Chadwick to report on making progress on setting up a framework for compensation. The then Chief Secretary to the Treasury gave a statement to the House and there have been debates on the matter in Westminster Hall. We will ensure that the House is updated. This is a very important issue and we will make sure that Equitable Life policyholders get justice.

Alan Whitehead: May I welcome the plans and funding set out last week to enable local authorities to build 150,000 new council houses over the next 10 years? Does my right hon. and learned Friend have plans to ensure that those houses will be built to the highest sustainability standard and the highest possible level of the code for sustainable homes? Will she ensure that new local authority house building becomes an exemplar for sustainable and low-energy housing in this country?

Harriet Harman: My hon. Friend is right: the new affordable home building taking place under "Building Britain's Future" is important not only because of the homes that it will provide and the jobs that will thereby be created, but because those homes will help to reduce carbon emissions and help the people who live in them to cut their fuel bills. The issues that my hon. Friend raises will be addressed in "Building Britain's Future"

Julia Goldsworthy: In March, the Prime Minister told us to expect a statement on compensation for pleural plaque sufferers after Easter. After Easter, the Justice Secretary told us to expect a statement before the summer recess, which is two weeks away. May we be assured that there will be a statement in the next two weeks, rather than an announcement of further delay?

Harriet Harman: We want to ensure that there is a statement about compensation for those who have developed pleural plaques. It is one of the many vicious respiratory diseases—which can be terminal—that come on people purely because of the work that they have undertaken. We want to ensure that those people receive proper compensation, and following the House of Lords judgment we must review the compensation system to make sure that it is fair to all.

Ronnie Campbell: Like the hon. Member for Falmouth and Camborne (Julia Goldsworthy), I am very disappointed—as are many of my colleagues—that there is no compensation scheme for pleural plaque victims. The Scottish Parliament is on the verge of introducing such a scheme. Will my right hon. and learned Friend drag the Justice Secretary to the Dispatch Box so that he can make a statement about the English and Welsh victims of pleural plaques?

Harriet Harman: My hon. Friend and other Labour Members have made their position absolutely clear. They think this is a question of fundamental justice, they want the Government to get on with it, and we must heed what has been said.

Richard Ottaway: At Prime Minister's Question Time about a year ago, I reminded the Prime Minister that no Labour Government had left office with unemployment lower than when they had entered it. His response was that it would not happen on his watch. Do the Government still hold that view?

Harriet Harman: I think that no Labour Government have faced the global economic crisis from which this Government are ensuring that the country will emerge, and I think that no Labour Government have done more to protect people from unemployment. If the hon. Gentleman is concerned about unemployment, why does he not back the public sector investment that would create jobs, and why does he not back the investment in jobcentres on which we are taking action and which his party would cut?

Hugh Bayley: York has such a severe shortage of affordable housing that many young people are being priced out of their own city. I welcome the Prime Minister's announcement last week of an extra £1.5 billion for affordable and energy-efficient homes, but will my right hon. and learned Friend ask representatives of the Homes and Communities Agency to meet me, along with councillors from York, to discuss how the additional money could benefit our city?

Harriet Harman: I will ask the head of the Homes and Communities Agency to meet York councillors and my hon. Friend.
	Is it not telling that whereas both Liberal Democrat and Labour Members have called for more affordable house building, there has been total silence from the Conservatives? That is because not only would they not put in the extra investment, but they would cut the existing investment that is so sorely needed. I assure all Members that we will take the necessary action to ensure that there is more affordable housing.

Reforming Financial Markets

Alistair Darling: With permission, I shall make a statement on the Government's proposals for reforming financial markets. Copies of our proposals are contained in a document that is available in the Vote Office.
	The world economy has been hit by a severe financial crisis, which has resulted in the worst economic downturn for well over 60 years. Its origins lie in failures in the banking system around the world. Financial institutions in many countries simply took on too much risk. They became over-reliant on wholesale funding and too exposed to particular products, and irresponsible pay practices made banks take unnecessary risks.
	It is also clear that some financial institutions appeared to have little appreciation of what was going on inside their own businesses. However, regulators and Governments too must learn from the events of the last two years, and understand better the risks that come from rapid globalisation in the financial system.
	Our economy has a clear need for well-managed, well-functioning banks and financial institutions to perform a vital set of functions, channelling investment and helping people to save and plan for the future. The financial services industry is also a major employer in this country—of over 1 million people—and it will continue to generate wealth for our country in the future.
	Our central objective must be to ensure that, as we come through the downturn, we reform and strengthen our financial system and rebuild it for the future, with consumers who are better informed, financial institutions that are better managed, and markets that are better regulated. The proposals that I will set out today build on our previous reforms to provide a new settlement that is open, competitive and effective and able to meet the needs of both business and families; that inspires trust and confidence on the part of businesses and consumers; that ensures robust regulation that reduces the likelihood of failures without preventing innovation; and that provides effective mechanisms for dealing with the failure of financial institutions should they occur.
	I want to take steps to help consumers make better informed choices. To ensure that they are given access to free impartial financial advice, we will legislate to introduce a national money guidance service and impose a levy on the financial sector to help fund it. We will also legislate to consolidate Financial Services Authority resources to provide separate independent consumer education, setting up a lead provider of consumer information and personal finance education. Consumers will also get more protection, along with a greater right of redress and access to compensation if things go wrong. We will also improve arrangements for depositor protection, including legislation to pre-fund and expand the role of the Financial Services Compensation Scheme.
	Because of the events of the past two years, there are fewer firms in the market providing financial services. It is essential that we retain competitive markets, as they play a key role in providing consumers with value and choice. We want to see greater competition and greater choice for consumers, as well as a bigger role for mutuals and building societies, so the Office of Fair Trading and the FSA will ensure that we maintain competition in the market for financial services. As we come out of this downturn, we need to promote a competitive market that enables new entrants—which may include non-banking institutions—and innovation to benefit consumers and businesses. In that way, we will see better informed consumers who have greater choices in a more competitive market.
	We also need banks and financial institutions that are better managed. We need a change of culture in the banks and their boardrooms, with pay practices that are focused on long-term stability, not short-term profit. The FSA now has powers to penalise banks if their pay policies create unnecessary risk and are not focused on the long-term strength of their institutions. From now on, I will require the FSA to report every year on how financial institutions are complying with their new code of practice for remuneration, and how it will deal with firms that do not comply.
	Bank boards and institutional investors must also become better equipped to do the job and understand their businesses, with more effective risk management and greater independence of non-executives, who must not be afraid to ask searching questions. Next week, Sir David Walker will report on measures that will deliver improved corporate governance at financial institutions, ahead of his final report in the autumn.
	Building on reforms already made, my proposals today will strengthen regulation of the financial system. They will cover three areas: first, new regulatory powers to allow tougher regulation of individual firms; secondly, measures to deal with the potential failure of institutions that could have a significant impact on the economy; and thirdly, a strengthened framework for financial stability to deal with system-wide risks in today's more complex and global markets. We will continue to work with other countries to deal with what is, at heart, a global problem.
	I asked Lord Turner to make recommendations, which the FSA is now implementing, to strengthen the regulatory regime and increase the intensity of supervision. They will strengthen the rules to ensure that banks hold enough capital as a buffer against losses, to introduce a back-stop power ensuring that banks do not over-extend themselves by lending too much when they do not have the strength to do so, and to increase the focus on bank liquidity so that they are able to carry out their business at all times. Those measures will help ensure that financial firms are stronger, more resilient, and better able to serve the needs of our economy.
	I will also introduce legislation in the autumn to give the FSA a new statutory objective for financial stability, and extend its powers to ensure that it has the appropriate rules to deal with different risks in individual banks, and tougher powers and penalties against misconduct, and that it can take account of new developments in the financial sector—including expanding regulation where necessary, for example for systemically important hedge funds.
	We need to ensure our resolution regime can deal with financial institutions of all sizes, including banks that are very large or complex. As these banks are often global, we also need an international mechanism for resolving large multinational banks, and we will bring forward proposals to G20 Finance Ministers when they meet in London in the autumn.
	At home, we can better deal with risks by ensuring that safeguards are in place—for example, by making banks hold capital at a higher level that reflects not only the possibility of failure, but its cost. By introducing higher standards and transparency, the FSA can also improve the functioning of key markets, such as the derivatives markets, so that problems in one institution are less likely to spread through the entire system. The FSA and the Bank of England will make institutions put in place practical resolution plans that can be deployed in the event that they get into difficulties.
	There is, of course, a debate to be had about whether Governments should restrict the size of banks or separate different types of banking, as happened in the United States in the 1930s. I believe that that is a simplistic solution, which fails to take into account the complexity of today's financial system. Small banks as well as large banks can threaten financial stability, as in the case of Northern Rock. Equally, both retail and investment banks, in different parts of the world, have failed in the past year, and it is not only banks that can affect stability, as we saw in the example of the American insurance company AIG. In addition, the approach of one regulator for one category of institution deemed to be systemically important and another regulator for the rest seems to me to miss the point, because what is systemically important can change rapidly, as we have seen in the past two years. Instead, the regulatory system has to recognise and respond to the complexities of individual institutions, and that is what we are doing.
	We also need to strengthen the framework for financial stability. That is a question not only of institutional powers and responsibility, but of better understanding what is happening in the markets. No simple fixes—no institutional reform—could have prevented these problems from occurring. There are different institutional frameworks in countries across the world, but no one model has been successful in insulating a country from the current crisis. Although regulatory arrangements were not the cause of the current problems, we need the right institutions to maintain financial stability and we must ensure that they have the right tools to do the job.
	The move in this country to a single regulator 12 years ago addressed problems with the previous regime of multiple self-regulators, which did not reflect the changing nature of financial markets, and our approach has been adopted by many other countries. However, 10 years on, the world had moved on again; some of the global problems of the past two years went beyond the scope of existing regulation, while others were simply not given sufficient attention by regulators and central banks. In this country, the authorities have been able, over the past year, to deal quickly and effectively with a number of financial stability issues, such as those relating to the Dunfermline building society and Bradford & Bingley, but further reform is now needed.
	We will therefore legislate to set up a new council for financial stability, which will bring together the Bank of England, the FSA and the Treasury. It will not only deal with immediate issues, but will monitor system-wide financial stability and respond to long-term risks as they emerge. That needs to be done on a formal statutory basis. The council will draw on the expertise of the FSA and the Bank, which are and will remain independent of Government, by looking at their regular reports—the financial stability report and the financial risk outlook—and formally responding to their recommendations. In that way, when risks or threats to stability are identified they will be addressed. This body will do that in a way that is transparent and accountable—so that people can see how and why decisions are made—with the regular publication of minutes. The council's responsibilities will be set out in law, with published terms of reference. In discussion with the Treasury Committee and the House, we will consider how to increase accountability through greater parliamentary scrutiny.
	We have already taken significant steps to improve the way in which we monitor and manage risks to the financial system as a whole, through more systematic use of stress testing of financial institutions, for example. The proposals that I am making today will further strengthen our ability to identify and deal with systemic risks, and will ensure that the authorities can be held to account for their actions. We also need to consider what further counter-cyclical measures are needed, in order to allow us to lean against the credit cycle and prevent the build-up of risks that could threaten the stability of the financial system. The principle of leaning against the cycle is easy to agree, but deciding what action to take and when to take it is far more complex. At the moment, there is no clear consensus here or abroad, but I believe that central banks will have an important role to play in that area.
	Today's global market for finance means that new measures can be effective only if they are implemented on a broad international basis, so under our presidency of the G20 we will continue to press for measures to strengthen the international regulatory architecture, building on the proposals agreed in April. In Europe, too, we will argue for enhanced monitoring of system-wide risks, while retaining the crucial link between national regulators and Governments. By working internationally, our efforts can help us deliver more effective supervision of global banks, stronger international standards, and a more responsible global financial services sector.
	We intervened to stabilise the banking system, while retaining a clear view that banks are best managed and owned commercially and not by the Government. We intend to return our stakes in the banks to the private sector, in a way that brings best value to the taxpayer, promotes competition and maintains stability, and we will use the proceeds to cut Government debt. We are empowering consumers, supporting better corporate governance and strengthening regulation, so that our financial sector can continue to be an engine of prosperity. I commend this statement to the House.

George Osborne: I thank the Chancellor for his statement, although frankly almost all of it was splashed over the front pages of today's newspapers. Once again, Parliament comes last, instead of coming first.
	Of course, there are some elements of the White Paper that we welcome: the improved consumer advice; David Walker's report on corporate governance, to which we look forward; a much better resolution regime for failed banks, which is clearly necessary; and the Chancellor's remarks on pay and bonuses, although he could have set a better example with the pay and bonus package for the chief executive of RBS. However, in most part, this White Paper is a totally inadequate response to what has happened over the last two years.
	For a start, the White Paper contains no serious analysis of what went wrong. I received a copy of it only 20 minutes ago, during Prime Minister's questions, but the only admission that I can see of any responsibility for what happened is the sentence that states that
	"the crisis has shown that aspects of prudential and macro-prudential supervision...were insufficient."
	That is the understatement of the century, given that half the British banking system has had to be nationalised. It also ducks every difficult question that needs to be addressed if we are to protect our society and our economy from a repeat of the mistakes that have caused such trouble. How do we replace the failed tripartite regime? What tools do we need to stop the excessive debt levels that did so much damage to our economy? How do we ensure that we have a banking system that competes across the world, and offers families and small businesses in this country the services that they are currently denied in this credit crunch, without the British taxpayer picking up the bill for the mistakes that are made? None of those difficult questions is properly addressed today; every single one is left to the next Government to deal with. It is more of a white flag than a White Paper—a complete surrender of this Government's responsibility to fix the system for regulating the City that they created and which so spectacularly failed.
	Let me press the Chancellor on some specifics on the conduct and content of regulation. First, on the tripartite regime, he must see how dysfunctional it has become. Institutional jealousies and blurred lines of responsibility mean that everyone gets involved but no one is in charge. Let us remember where this all began—with the arrogant decision from the new Chancellor in 1997, without warning or consultation, and in the teeth of the opposition of the late Eddie George, to remove banking supervision from the Bank of England. My right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley), the then Shadow Chancellor, warned from this Dispatch Box that it would leave no one responsible for the liquidity of the banking system or to guard against systemic collapse. Sadly, that prophecy turned out to be all too true. No one was responsible for liquidity. No one was looking at systemic risk. Even the FSA itself admits that it took its eye off prudential supervision. When the crunch came over Northern Rock, no one knew who was in charge. Almost two years later, we still do not know who is in charge. The Chancellor should have come here today to bury the tripartite system, not to praise it. The only thing that stops him is the vanity of the Prime Minister who refuses to admit that he made such a fundamental mistake.
	The same applies to the content of regulation. The first half of Lord Turner's report contains the most damning critique of what went wrong with this Government's economic policy. He points to the "major and continued macro-imbalances" in the British economy. He says that the failure to spot this was
	"one of the crucial failures of the years running up to the financial crisis",
	and he says that the
	"vital activity of macro-prudential analysis...fell between two stools".
	What does this White Paper propose to do with that vital activity in future? It puts it between two stools again. After two years of thinking in the Treasury—wait for it—we are going to have a council on financial stability that will bring together the Treasury, the Bank of England and the FSA. I thought that that was what the tripartite regime was supposed to be about all along. We do not need another divided committee. We do not want more divided responsibilities. We need clear lines of accountability that run all the way to Threadneedle street. They do not exist at present.
	Instead of clarity, what we get from the Government is confusion. The Governor of the Bank of England appeared before the Select Committee on the Treasury two weeks ago, and he said:
	"We were given a statutory responsibility for financial stability in the Banking Act, and the question...to which I have not really received any adequate answer from anywhere, was: what exactly is it that people expect the Bank of England to do?"
	We are none the wiser after this White Paper. Perhaps it would have helped if the Chancellor had shown the White Paper in draft to the Governor of the Bank of England two or three weeks ago instead of in recent days.
	Is it not absolutely clear that the Bank of England now has to be given not just the responsibility but the tools for macro-prudential regulation? Can the Chancellor confirm that there is not a single new power for the Bank of England in the White Paper? The Bank of England should have the power to call time on debt, as we suggested almost a year ago; it should be able to set counter-cyclical capital rules in conjunction with other countries—and, by the way, that would be a much better use of international co-operation than the current proposals from the European Commission, which are ill conceived and damaging to the UK—and it should have the statutory powers to intervene when the structure of a financial institution threatens the whole economy, so that, in the Governor's words, it can force its "sermons" to be listened to.
	The Bank of England cannot do any of those things unless it has the experience and knowledge of their day-to-day regulation. Let me make it clear to the Chancellor today that the next Conservative Government will abolish the tripartite system, and let me tell Parliament first—unlike his policy—that we will put the Bank of England in charge of the prudential supervision of our banks, our building societies and our other significant financial institutions. We have learned from this crisis the old truth that one cannot separate central banking from the supervision of the financial system and that sound regulation is not just about a checklist of rules but about the authority to exercise judgment and to see the bigger picture.
	Sitting alongside a stronger Bank of England we will have a powerful regulator to protect consumers—a regulator with the clout and focus not just to add more health warnings alongside the acres of small print that already come with financial products but to stamp out unfair practices such as mis-sold payment protection insurance and excessive bank charges. We will set out the details of that in our own alternative White Paper later this month. Will not the choice be clear then?
	We have today a submission from the Labour party, which will be implemented in full only if it is re-elected, and proposals from the Conservative party. The Labour party wants to stick with the financial system that failed us, which it created. We propose to overhaul that system and put the Bank of England in charge. People will know at the next election that if they want to change the way in which the City and our banks are regulated, they need to change their Government.

Alistair Darling: The hon. Gentleman seems to be trying to reduce this debate to a football match between the Bank of England and the FSA. It is not a matter of which institutions do what. It is about ensuring that the regulatory system delivers on making sure that it has tougher regulation. The hon. Gentleman argues that the Bank of England should take over the prudential supervision and regulation of what he calls important banks, building societies and insurance companies. That is not a power that the bank is seeking at the moment, but he is entitled to hold that view. I have said on many occasions that we can argue about where to draw the line as to who does supervision of banks, who does supervision of building societies and who does consumer protection, but the key issue is ensuring that regulators can do their jobs properly, that they have the tools to do their jobs and, crucially, that they bring to bear the right judgments whenever problems arise.
	The hon. Gentleman will recall that, 10 years ago, one of the reasons why we ended self-regulation was that, quite simply, it did not work. He will recall, too, that in the past there had been criticism of the Bank's regulation of BCCI and Barings. The fact that there have been mistakes in institutions is not a good reason for saying that we have to tear everything up. I believe that we should build on the strengths of the system that we have. It does not matter where we draw the line—when it comes to a crisis and to identifying problems in the future, we will need the Bank, the FSA and, because a cost will inevitably be involved, the Treasury at the same table.
	I believe that the present system of co-ordination between the Bank, the FSA and the Government needs to be strengthened, reformed and put on a proper basis. Why do I say that? When the Bank of England next warns that there is a risk building up or that perhaps there is too much credit flowing, someone needs to react to it and to do something about it. That is why we have to have both the Bank and the FSA at the same table. That is why I believe that the arrangements between the three institutions need to be strengthened and that is why I am making these proposals.
	I do not believe that what the hon. Gentleman is proposing—that one can somehow say that some institutions are systemic and some are not—would work. For example, three years ago people would not have argued that Bradford & Bingley, Northern Rock or the Dunfermline building society would have been of systemic importance to this country. However, the truth is that when they got into difficulties they were systemic. That was why we had to do something about them to stop the problems from spreading wider. I do not believe that the divisions that the hon. Gentleman is proposing are workable. I believe that the measures that we have at the moment need to be strengthened and improved to ensure that in future, when these warnings are seen, they can be dealt with and the people who are charged with the responsibility can be held to account.
	I agree with the hon. Gentleman that this has international implications—I am grateful to him for recognising that—particularly if one wants to dampen down the availability of credit. In today's globalised market, we cannot do that in one country alone. We need an international agreement and to ensure that people are working in the same way, and that is why international co-operation is very important.
	Finally, I am very sorry that the hon. Gentleman did not get the document on time. I can assure him that I saw a man with both the document and the statement leave the Treasury shortly before half-past 11 this morning. I have no idea how the hon. Gentleman got the statement and not the document.

Vincent Cable: I acknowledge that there are many things in the paper that can be welcomed—which, indeed, we have advocated in the past—but their implementation has a timeless quality, as if we are on a kind of progression from White Paper to Green Paper to blank paper. Almost all of the important recommendations would happen after the next general election. I know that a couple of weeks ago the Chancellor was advocating that banks prepare living wills; one rather gets the feeling that this is a living will for the Chancellor.
	Having advocated macro-prudential regulation of bank reserves for five years or so, I very much welcome the Government's embracing it. Surely it must be right, however, that in anything that requires an understanding of the overall economy the Bank of England must have a central role—not a unique role, but a central position. That is not clear from the statement.
	I welcome, too, the strengthening of consumer protection. We have at last got to the idea of generic independent advice, but it has taken 10 years of campaigning by Citizens Advice and others to get there. I am not clear, however, about how the Government continue to preserve a fragmented system of consumer protection with responsibilities confusingly divided between the FSA and the Office of Fair Trading. Will that be clarified?
	I welcome, too, the emphasis on competition. However, does the Chancellor buy the argument of the European Commissioner, Neelie Kroes, who said that, if we are to have real competition in British banking, banks must be broken up and subdivided, and in particular the Lloyds-HBOS merger might have to be unscrambled? Does the Chancellor agree?
	The big issue, as the Chancellor rightly emphasised, is the major question about the banks that are too big to fail, too big to supervise and too big for the taxpayer to underwrite. He correctly said that small banks as well as big banks can go wrong—that is absolutely right—but is there not a fundamental problem that when very large interconnected banks try to be the biggest investment bank in the world, the exposure to the British taxpayer is then wholly unacceptable? Therefore, these banks have to be subdivided for that reason.
	The Chancellor is looking over the distant horizon at necessary reforms, but may I suggest to him that key problems exist today? The publicly owned banks are not responding to the borrowing needs of sound British companies, and the bonus culture is being reinstated in publicly owned banks that are owned by the taxpayer. There is a complete lack of direction, and I suspect that a central reason for that is that the Government are so desperate to get the publicly owned banks back into the private sector quickly that too little attention is being given to defining the public interest.
	I suspect that the White Paper will be received in the City with a great sigh of relief. It is yet another indication that we are getting back to business as usual.

Alistair Darling: On the last point, I think that most hon. Members agree that we need to toughen up the regulatory system significantly. We need to make changes, but we must not lose sight of the fact that this is an industry that employs over 1 million people in this country, more than half of them outside the south-east of England. It is important that we do not give the impression that we would rather be shot of it, because it is quite important. In the past nine years, it has contributed more than £250 billion in tax revenues—quite a useful sum. When it recovers, I hope that it will continue to make a contribution in the future.
	The hon. Gentleman asked about selling. If he looks at the White Paper he will see that we make it clear that we will sell when we think that the time is appropriate. We do not have an artificial time scale and we are not under any pressure to sell, but it will not have escaped his notice that just at the moment the shares in the two banks that we own are worth slightly less than we paid for them. He therefore need have no fear of being confronted with a quick sale: we will do what is right to achieve the best value for the taxpayer.
	On lending, I agree with the hon. Gentleman that it is important to try to get credit flowing in the economy again. That is a key part of what we are doing. Mortgage lending and the availability of lending for mortgages have increased but more needs to be done in certain sectors of business lending, such as to small and medium-sized enterprises, and especially to the medium-sized ones. For example, I welcome today's announcement by Prudential of a fund worth £1.5 billion specifically geared to medium-sized companies. That is an example of a non-bank bringing together pension funds, local authorities and its own funds to make money directly available to medium-sized firms, and it is a useful step in the right direction.
	The hon. Gentleman made some broader points, and one of them had to do with the "too big to fail" argument. I understand where he is coming from, but I said in my statement that we must take into account the cost to the taxpayer as well as the wider effects of failure, and that we must regulate accordingly. However, there is a flaw in his argument—I heard him being asked about this on the "Today" programme at 10 past 7—and it is that he seems to back off from the consequences of telling a large bank that it is too big. In response to that, the bank might say, "We're too big, so we'll go somewhere else." Alternatively, dividing such a bank into lots of different companies, as was the case with Lehman Brothers, does not solve the problem. When Lehman Brothers went down, the whole shooting match went down, not just one aspect of it.
	The hon. Gentleman made a wider point about macro-prudential supervision. In my statement, I said that given what central banks do, and what the Bank of England in particular does, I anticipated that such supervision would have a wider role, as we work through the present circumstances. The Bank of England is the obvious place for it, but I come back to the point that I made to the shadow Chancellor: wherever the lines of responsibility are drawn, we need a regulator who is able to look at the wider prudential supervision of the system, and the wider financial stability. We also need a regulator who will drill down to the nuts and bolts of every single company.
	Whether people like it or not, there is no country in the world whose treasury does not have to be at the table. We know all to clearly that either the law has to be changed or there is a fiscal cost, so three people have to sit around the table regardless of how the regulatory cake is divided. That is something that the shadow Chancellor will not face up to.

Several hon. Members: rose —

Mr. Speaker: Order. There are 23 Members seeking to catch my eye and, as ever, I would like to accommodate as many as I can. However, I am looking to each right hon. or hon. Member to ask one brief supplementary question—and of course to the Chancellor of the Exchequer to provide an economical reply.

John McFall: The Treasury Committee has made a detailed examination of the banking crisis. It found nothing wrong with the architecture of the tripartite authority, but a lot wrong with the warnings given by the Bank of England and the FSA, which were too weak. I therefore welcome and the establishment of the proposed council for financial stability. We need it to have strength and grit, and I am looking for reassurance from the Chancellor in that regard.
	At the core of the matter is the restoration of trust and confidence. Will my right hon. Friend support the establishment of a banking commission, with a membership of lay people and not those representing narrow City interests? That would ensure that the future of the financial sector served the wider needs of society and individuals, and not just the City's narrow needs.

Alistair Darling: I am grateful to my right hon. Friend for his comments. I believe that the reforms that we are making to the relationship between the FSA, the Bank of England and the Treasury will make it much better. The relationship will be on a formal footing, with people able to see exactly what has been discussed and decided. When later questions arise about what happened in response to a particular warning or a concern that has been expressed, people will be able to see what was done. I think that that will make a big difference.
	I agree with my right hon. Friend's general point about ensuring that banking serves the wider community because, after all, financial services are a means to an end. Those wider questions need to be addressed, and I know that the Treasury Committee has looked at them. That is something that I would support.

Michael Fallon: The Chancellor seems to have trebled the confusion over responsibility for financial stability by spreading it between the Bank of England, the FSA and the new council for financial stability. Will he explain what powers the new council will have? Page 138 of the White Paper seems to give it three new statutory duties just to discuss risk.

Alistair Darling: The Bank of England has a statutory duty in relation to financial stability as well as monetary policy. The hon. Gentleman will know that the Banking Act 2009 gave it powers to deal with a bank that has failed. The FSA deals with the individual supervision of banks, and I announced today that it can now have different rules for different individual banks. That is quite an important change, especially with regard to the matters raised by the Liberal Democrat spokesman, the hon. Member for Twickenham (Dr. Cable). We have one body looking at the overall system, and one looking at the particular. They need to work together and, as I said, whether one likes it or not, the Treasury needs to be at the table because of the fiscal consequences of any action that might have to be taken.
	The hon. Gentleman asks who is responsible for doing what, but that depends on what is required. It is obviously for the Bank of England to act on monetary policy, for the Treasury to act on fiscal policy, and for the FSA to deal with an individual regulatory requirement.

Sally Keeble: I particularly welcome the proposals for stronger consumer protection, with an improved advice service and a stronger Financial Services Compensation Scheme. The FSCS has been the one organisation to come out of the crisis with real credit after a good performance. How does my right hon. Friend intend to strengthen it?

Alistair Darling: We need to arrange that the FSCS is pre-funded. We say in the White Paper that that cannot be done immediately, and certainly not at the present time when so much is at stake. It will be better in the long term, however, if the FSCS is pre-funded, as then it will have money in the event that something goes wrong.

Peter Lilley: Does the Chancellor recognise that the City of London has become the financial capital of the world—to the immense benefit of this country—partly because we have always had a system of prudential supervision that was strong, flexible, unified and not rigidly bureaucratic? As my hon. Friend the shadow Chancellor pointed out—and as was predicted by those on the Conservative Benches at the time—that was undermined by the tripartite system. Why, then, is the right hon. Gentleman handing power over to countries with financial systems that have been less successful than ours? Most of our partners on the continent have much more rigidly bureaucratic regulation of their financial systems. Is it not wrong to hand ultimate power over our system to them?

Alistair Darling: As a general principle, I agree with the right hon. Gentleman's last point. His thesis falls down, however, when one realises that the City of London's reputation and size as a world financial centre have grown over the past 10 years, so his argument that it all somehow went wrong in 1997 does not seem to add up.
	Where I probably do disagree with the right hon. Gentleman is that, although I believe that the relationship between national regulators and Governments is very important, we are talking about a global crisis. Part of the problem is that banks that trade across the world have got into trouble, and that needs more international co-operation. It also means that we need to work with Europe, and that is where the Conservative party is making a huge mistake. If it gets into bed with some weird and odd people in Europe, it will have no influence whatsoever over issues that do matter to the City of London.

Rob Marris: The Canadian banking system is pretty solid, with very large banks that are not divided between the retail and investment sectors. Canada has fewer banking regulations than the UK or USA, yet no Canadian bank has failed or been bailed out. Will my right hon. Friend say what lessons he has learned from the stability of the Canadian banking system?

Alistair Darling: Over the years Canada has, in many ways, followed the model that we have been moving to, trying to streamline the regulatory system. I remind the House that 10 years ago there were eight or nine different regulators—self-regulating bodies—and also that the Bank of England never, ever regulated all financial institutions. It was frequently the case that a bank would be regulated by three or four different institutions. That made no sense whatsoever and the Canadians recognised that. Everyone should reflect on that.

Peter Viggers: Does the Chancellor agree that there are two distinct roles to be carried out, one being the detailed supervision of the rules, best carried out by the FSA, and the other the overall financial strategic control of banks? If the latter role is to be carried out by the Bank of England, will he ensure that the Bank is properly resourced?

Alistair Darling: I entirely agree. The hon. Gentleman has put very briefly the point that I was putting to the hon. Member for Sevenoaks (Mr. Fallon). Yes, of course the Bank needs to be resourced to do the job.

Gordon Prentice: Sir Fred Goodwin famously did not have a recognised banking qualification. Should chief executives be expected to have one?

Alistair Darling: The FSA has a responsibility to make sure that people who are charged with running banks are qualified to do so. That was recognised by Lord Adair Turner's report.

Andrew Tyrie: A moment ago the Chancellor said—I pretty much quote—"I expect the Bank to have a wider role in all this." Only a few days ago the Governor came before the Treasury Committee and said that he had not been consulted at all about the White Paper or even seen a draft. When did the Chancellor first show a draft of the document to the Governor of the Bank, and why did he not consult him fully earlier?

Alistair Darling: I have had many discussions with the Governor of the Bank over the past couple of years about these things, and I will have many discussions with him in advance of the preparation of the White Paper. In particular, I have talked to him about the role of the Bank. If we further develop the powers that may be necessary to lean against credit cycles, I have made it clear that the Bank of England is the obvious place to go. However, the point that I was making is that currently the power to increase or reduce capital requirements, which is the most obvious brake one could put on financial institutions, lies with the FSA. I do not want to end up with a situation in which banks do not know whether the FSA governs their capital requirements, or the Bank of England does. The Bank does not want to regulate individual banking institutions and so on. People can hold different views about that, but I want to make sure there is a clear delineation of who is responsible for what, so that we can better hold people to account for what they do.

Gordon Banks: With the international implications of the current marketplace, can the Chancellor tell us what discussions he had with international partners before arriving at the content of his statement today?

Alistair Darling: I have, of course, spoken to all my counterparts on several occasions since these problems first arose at the end of 2007. It is interesting that most countries have more regulators than we do. Most of them are trying to streamline the regulatory system—in the United States, for example. Not everybody's financial industry is in the same position or made up in the same way. What I think the industry and the public want is to make sure that we have a system that is coherent and that works. Above all, we must not lose sight of the fact that no matter what institution and no matter what rules, much of this is ultimately about individual judgment—making the right calls at the right time. That is the problem that occurred in the lead-up to the current situation and that is what we must get right.

John Thurso: At the beginning of his statement the Chancellor mentioned the importance of competition. Does he accept that the shotgun marriage that he oversaw of Lloyds with HBOS was bad for competition, as well as proving to be a bad deal for both the shareholders and the taxpayer? Will he now do the honourable thing and oversee an amicable divorce?

Alistair Darling: The shareholders of both Lloyds and HBOS voted overwhelmingly, separately, for the merger to take place. The process took about three months. I do not know how the hon. Gentleman describes "shotgun", or whether he would regard a three-month engagement as being sufficient, but both parties were willing participants in the act and the shareholders of both voted to go along with it.

Andrew Miller: Although there is no direct read-across to other sectors outside financial services, will my right hon. Friend bring his report to the attention of other regulators? It is important that lessons about systemic failure are learned where appropriate, and the FSA can learn from other regulators about how they have done things—for example, setting up better consumer panels.

Alistair Darling: I know that regulators speak to each other where they have common interests or concerns, and I am sure they will do that. I have said specifically in the White Paper that the FSA and the OFT will work closely together in order to ensure that as we come through the downturn, we have a competitive banking system. Especially after the consolidation of foreign banks, it is important that we have choice and competition in the future.

Graham Brady: The remuneration package agreed for Mr. Stephen Hester at RBS is weighted towards the long term and has clawback provisions in the bonus. Is the Chancellor happy that that is an acceptable package, which reflects the kind of long-term measures for remuneration that he said should be put in place, or does he believe that that specific example would lead to different capital requirements?

Alistair Darling: I am not against bonuses—I meant to take the point up with the hon. Member for Twickenham—in whatever walk of life, if one can reward people for doing something special or for making an extra effort, particularly if it is designed to build the long-term strength of the bank. In the case of RBS, where there is a new management running a bank with a balance sheet that is almost the size of this country's wealth—on one view, it is the largest bank in the world—it is important that there is an incentive to help taxpayers get their money back.
	The hon. Gentleman asks about penalising. It will be for the FSA to look at each case to ensure that there is a bonus structure or a reward structure generally, not just at the top, but throughout the entire system, that it is built for the long term, and that there is clawback—all the conditions that we set out—otherwise it will visit the appropriate penalties. People in banks must be focused on building their banks for the long term, otherwise we will be back exactly where we started.

Ann Clwyd: I welcome the White Paper, particularly the points made by my right hon. Friend about changing the financial culture of banks. It sounds, therefore, as though he might like to incorporate in future legislation an excellent Bill restricting the pensions of board members of banks that are wholly or partly owned by the taxpayer. Will he consider the matter?

Alistair Darling: I know that my right hon. Friend had a Bill before the House, which she discussed with me. It is important that all parts of the remuneration—pay, bonuses or pensions—are based on reality and what is reasonable, and that they are geared all the time towards helping the bank or similar institution build for the long term, and do not leave it prone to taking short-term risks, which can prove so disastrous.

Peter Tapsell: May I remind the right hon. Gentleman that on 11 November 1997 I explained to the then Chancellor over eight columns of  Hansard why the tripartite regulation of the banks would not work? May I warn the current Chancellor, with more brevity, that his proposals will not work either? May I modestly suggest that he look at my speech before proceeding to legislation?

Alistair Darling: I will bear that in mind for my holiday reading over the summer. I have the vaguest recollection that I may have looked into the Chamber in the course of one of those columns and looked back out again. I remember those debates quite well.
	As the hon. Gentleman knows, the problem that we had 10 years ago was that the Bank of England never regulated all aspects of financial services. It regulated the banks, but throughout the 1990s it was obvious that many banks had many other interests, such as insurance, that were regulated by other bodies. Such duplication and complication did no one any good. Indeed, the entire self-regulatory regime was pretty discredited by the mid-1990s. As I said to the shadow Chancellor, we can argue for ever and a day about where we draw the line. When the bank or the FSA is doing something, what matters, as the hon. Member for Gosport (Sir Peter Viggers) put it so succinctly, is that a distinction is made between the general supervision of the system, the financial stability, and an organisation that says to each individual, "This is what you should be doing", drilling down into the nuts and bolts of it. The structure that we have is right. It needs to be strengthened and built on, and that is why I make my proposals today.

Mark Durkan: Chapter 9 of "Reforming financial markets" touches on the future regulation of credit unions in Northern Ireland. Does the Chancellor accept that for change to work, the FSA will have to have a strong and active regional interface, which we have not had before? Does he accept that that applies equally to the wider banking market in Northern Ireland, which has very different features from the banking market on this island? If the future arrangements for industrial and provident societies are to work, can we afford to leave the savers of the Presbyterian Mutual Society as casualties by the wayside?

Alistair Darling: I am aware of the problems relating to that society, and arrangements are being made to examine what happened and what might be done, but we have to be aware of the implications that there might be for institutions in other parts of the UK.

Desmond Swayne: Does the Chancellor agree with the Governor of the Bank of England's assessment that it was not clear how the Bank would discharge its new responsibilities if it could not go beyond issuing sermons? Or did the Governor say that simply because the Chancellor had not shown him a copy of the paper that he brought to the House today?

Alistair Darling: The proposals that I put before the House today mean that when the Bank sounds a warning or expresses concern through its financial stability report, there is now a mechanism to make sure that those recommendations do not just lie on a shelf, but have to be addressed and dealt with. That is a major step forward.

Michael Meacher: As two of the main causes of the economic breakdown and the credit crunch were the mass-proliferation of toxic credit derivatives and the gross recklessness of the investment arms of the banks, does my right hon. Friend not think it necessary to prohibit, or at least require official approval of, potentially risky derivatives? Given the eye-watering cost of bailing out the banks, how can he justify continuing to give state underpinning to the casino investment banks, rather than limiting that underpinning to the traditional commercial banks?

Alistair Darling: On the latter point, the answer is quite simply that investment banks are systemically important, as we have seen in this country and in America. As we saw in America prior to the banking collapse in October, simply letting them go has potentially disastrous consequences. Indeed, it was the collapse of some of those American banks that immediately precipitated the problems. On the wider point, banks need to be properly regulated, but if my right hon. Friend is getting to a point where he can say that there should be some sort of veto from the regulators, I would say to him that that might be more difficult. It is better to have a system that regulates risk within institutions, rather than one that is wider than that.

William McCrea: I have no doubt that the measures that the Chancellor announced today are worthy of our careful consideration, but the bottom line in reality for many of our constituents is that medium and small businesses are still not gaining the help that is necessary to make them sustainable and profitable. Will the measures assist in getting money to where it is needed?

Alistair Darling: The need to get lending going—particularly for small and medium-sized enterprises, but for others, too—is urgent. Measures are already in place to try to ensure that that happens. I know that concerns are being expressed in the different parts of the country and different sectors where that is not happening sufficiently. That is why I welcome the announcement today by Prudential that it intends to lend to medium-sized companies. The SME sector is of particular concern, simply because of its size and the number of people whom it employs, not just in Northern Ireland but in the rest of the country, too. We have to step up our efforts to make sure that we get that lending going.

Geoffrey Robinson: I apologise for missing the Chancellor's first few remarks in his statement. May I compliment him on resisting the seductive structural arguments coming from the Opposition parties, both with regard to splitting up the activities of banks and with regard to doing away with the tripartite system, a move recommended so strongly by the Opposition? Does he not share my surprise at the ease with which a few kind words from the Governor of the Bank of England have persuaded the shadow Chancellor to hand back to the Bank those responsibilities that it previously discharged with such abysmal incompetence, and more? Does the Chancellor not agree with me that the likely consequence of doing what the shadow Chancellor proposes will be that we end up with not just bad regulation, but probably a ruined monetary policy system, too?

Alistair Darling: I take the view that I have held consistently for the past 10 years. It was right to give the Bank independence to deal with monetary policy. That will stay; I do not think that anyone wants to reopen that decision. It is right, because of its responsibilities, that it should have a view on financial stability. When it comes to the whole question of macro-prudential supervision, if one were to give more powers, the Bank would be the obvious place to go. I honestly do not see the advantages of saying that the Bank should also start to involve itself with the hundreds of different banks, building societies, insurance companies and other financial institutions, because all that that would do is simply move a large chunk of the Financial Services Authority into the Bank, and I do not think that that institutional change would benefit people at present. I would rather build on what we have, and identify the problems that we have.
	I repeat a point that cannot be made often enough: institutions are important, and so are the tools to do the job, but at the end of the day, we are talking about a matter of judgment. Frankly, yes, the FSA got things wrong with Northern Rock, and the Bank of England, in the '80s and '90s, made mistakes of judgment. We have to concentrate on trying to make sure not only that we have the institutions and the tools, but that people understand what they are doing.

Angela Watkinson: What caveats and terms and conditions did the Chancellor attach to the provision of the vast sums of public money that were used to bail out our failing banks? Did the banks comply, and if they did not, what sanctions did he put in place?

Alistair Darling: I am not sure whether the hon. Lady was present at the many debates and statements that we have had on that subject, but earlier this year, I set out at some length—I think on a number of occasions—the measures being put in place. The hon. Member for Louth and Horncastle (Sir Peter Tapsell), who recommended reading  Hansard over the summer, has left the Chamber, but if I am to read his speech, she might want to look at some of mine.

Stewart Hosie: I thank the Chancellor for advance notice of the statement. I welcome the fact that he spoke of systemic risk, and the fact that there is a chapter in the document about derivatives markets. However, in essence, the four points are simply to call for an EU directive, to work towards "a roadmap delivering...improvements", to support "international efforts" and to support "the principle of greater transparency". When will we have real plans to deal with that aspect of systemic risk? When will the markets have access to proper pre-trade and post-trade information, and when will the markets have access to proper, secure pricing data? When will the analysts have all the information that they need properly to identify the risks that such products pose?

Alistair Darling: The hon. Gentleman makes a very fair point. We need an open, transparent market, so that people can see what is going on with their derivative products. We can fix some of those issues in this country, through FSA requirements, but some of them need European agreement because they are governed by directives, whether we like it or not. Given the relationship with the United States and the interrelationship with the markets, there are other wider international implications, too. However, on the general proposition that we ought to have more openness, so that people can see what is going on, and crucially so that perhaps some of the people running the banks know what is going on, the more that that happens, the better it will be.

David Heathcoat-Amory: On that point, there is an overriding need for clarity and certainty in financial regulation, so why are the Government apparently contemplating handing over many of the rule-making and supervisory functions to three new EU financial authorities, so that instead of a tripartite system at home, we have a new hexagonal system of financial regulation, with a bigger hole in the middle, less certainty, less accountability, and more confusion when things go wrong? Is that really what the Government intend?

Alistair Darling: No, but we need to recognise—I was going to say "whether the right hon. Gentleman likes it or not", but I know that he does not—that Europe and the European Union have some influence on the way in which financial markets operate, in relation to directives, capital ratios and so on. The point that I made to the right hon. Member for Hitchin and Harpenden (Mr. Lilley) was that the British Government have to work to fight for the British interest. That is why it is far better if one is able to work with the mainstream political parties, rather than people who are out to lunch.

Susan Kramer: The Chancellor made no mention of the credit rating agencies, but they are the canaries of risk in the system and they got it spectacularly wrong in the previous crisis. Is he looking at providing any guidance or a framework for credit rating agencies and, in particular, at tackling the potential conflict that exists because the entities that are assessed pay the agencies' fees?

Alistair Darling: The hon. Lady is right. The Financial Stability Board, which the International Monetary Fund set up, is looking at the issue, because credit rating agencies are mostly American and they operate throughout the world. We have to have international agreement, and in Europe steps are being taken rather more quickly to try to ensure that agencies are properly regulated. She is right that they can be hugely influential, but I have always made the point that a credit rating agency's advice should be one factor influencing people's decisions. It should not comprise their total judgment, because it cannot.

William Cash: Does the Chancellor accept that his statement, "whether we like it or not", in relation to the European Union is rubbish and as outrageous as anything we have heard from him for months? Will he accept, very simply, that we can make our own decisions in this House; that those matters do affect every single man, woman and child in this country, and the City of London; and that, for us simply to have to accept that all decisions must come from the jurisdiction of the European Union, to which the so-called national supervision will be subject, is a complete outrage that will lead to all the difficulties, all over again, that we saw with the stability and growth pact and all the other economic paradigms with which the European Union has come forward? His statement is complete rubbish. He knows it. Why does he not just pack it in?

Alistair Darling: I know that the hon. Gentleman is obsessed with all things European, and I wonder how he and quite a large number of his colleagues are ever going to be able to make a rational decision about anything in relation to Europe— [ Interruption. ]

Madam Deputy Speaker: Order. The hon. Gentleman has asked a question of the Chancellor, who is replying.

Alistair Darling: All I say to the hon. Gentleman is that we are part of the European Union, which is an important market to us, and that that means that we should be an active partner in it, fighting the British corner. It means also that we have to be prepared to speak to people in Europe, rather than pretend that they do not exist.

Point of Order

Bob Spink: On a point of order, Madam Deputy Speaker. About 350 passengers, some of them my constituents, on the cruise ship the Marco Polo, which is now berthed in Invergordon, have symptoms of norovirus, the vomiting bug. NHS Highland is considering moving passengers to London on dozens of coaches—a 10-hour journey without sufficient toilet facilities—or on a train. Passengers generally want the ship to return to Tilbury as soon as possible; most are being cared for properly, in their cabins, and NHS Highland could put nurses and doctors on board the ship to help. How can we in this House ensure that the matter is dealt with properly and in the best interests of our constituents, the passengers?

Madam Deputy Speaker: I am sorry to hear what the hon. Member has to say, but it is not a point of order for the Chair. Nevertheless, he has been able to express his concerns about many of his constituents.

Care Homes (Domestic Pets)

Motion for leave to introduce a Bill (Standing Order No. 23)

Nick Palmer: I beg to move,
	That leave be given to bring in a Bill to make provision for residents of care homes to keep domestic pets in certain circumstances; and for connected purposes.
	In addition to the subject of the title of the Bill, I propose to discuss sheltered accommodation. I am pleased to be able to present this Bill today and delighted to have received so much cross-party support for what it outlines from colleagues, including the shadow spokesmen for animal welfare and for elderly people. The issue touches every constituency throughout the UK and, given a growing elderly population, will need to be addressed.
	Superficially, the issue appears to be about animal welfare, and I should say that I have been involved in animal welfare organisations for even longer than I have been a member of the Labour party, which is 40 years. Indeed, Alexander Solzhenitsyn once made the relevant connection, saying:
	"Nowadays we don't think much of a man's love for an animal; we laugh at people who are attached to cats. But if we stop loving animals, aren't we bound to stop loving humans too?"
	Separate from that, however, I see the issue as one about the right of elderly people to live their lives as they wish, without too much well meant regulation of every detail from the moment that they leave independent accommodation to the moment that they move to sheltered accommodation or care.
	The problem is simply stated: when people move into sheltered accommodation or into care, there is no consistent policy allowing them to take a pet with them. As a direct result, in the most recent year for which statistics are available, 38,000 healthy pets had to be put down and a further 100,000 had to be given up by their owners. Many of those pets will have been put down after an attempt to re-home them.
	Moving home is stressful for anyone. Moving from one's long-standing home into sheltered or care environments is often traumatic, as one separates oneself from independent life. If we add to that having to part from one's pet and, even, having to order it to be put down, we add distress and guilt, and there is a very clear case for Parliament to help in avoiding that if it can.
	Practice varies enormously throughout Britain, but there are numerous examples of successful schemes that allow pets to remain with their owners, and that should be the norm for sheltered housing. The fact that one is now living in a warden-aided flat should not remove one's right to make the choice to keep a pet. Pets provide an important source of physical, emotional and social support for many older people, and there is extensive evidence of improved cardiovascular and mental health and other health benefits from the relationship with a familiar animal. It mitigates the loneliness of many people in old age and provides an avenue for nurturing, caring and taking responsibility for others, and maintains the sense of still feeling useful.
	I have discovered that many older people find that when it is time to move into care, there are wildly different practices throughout the country, making for a postcode lottery if one wants to keep an animal. There are no legal obligations on residential homes in that respect, and that is in stark contrast to other countries, including the USA, Germany, Greece, France and Switzerland, all of which have introduced legislation to ensure that older people have the right to keep or maintain contact with animals, whether those people live independently in the community, in sheltered accommodation or in long-term homes.
	As far back as 1970, France legislated for pets to be allowed in all public and private housing, provided that the pet is properly cared for and not causing a nuisance. In 1983, the USA passed a national law permitting older and disabled people to keep pets in housing that received federal funding. The Society for Companion Animal Studies, supported by the Pet Food Manufacturers' Association, both of which have been extremely helpful in preparing the Bill, has published research to assess the scale of the problem in the UK. It found that 65 per cent. of care homes have no formal written policy whatever. Of those that do, 29 per cent. permit pet ownership, but more than half—54 per cent.—specifically exclude cats and dogs.
	I know from correspondence from constituents that there are genuine concerns about pets going with their owners into shared or nursing care accommodation relating to pets not mixing well and about adequate exercise for dogs; responsibility for the payment of veterinary care when it becomes necessary; and the fact that older residents might be frightened of or allergic to animals. I am not arguing for a blanket policy, stating that every pet, from an anaconda to a Rottweiler, has to be admitted; I am arguing for a basic presumption that pets be permitted—subject to appropriate discussion about all the eventualities that can arise, and provided that they do not cause a nuisance to other residents.
	Care providers would be understandably and rightly concerned if an extra burden was placed on them. However, evidence from experience is that an intelligent policy allowing animals actually reduces the burden on staff; residents who would otherwise make frequent demands on staff time often focus on their companion animals for much of the day.
	Best practice guidelines are available for any authority that changes its policy. Wandsworth council has been proactive on the issue; its previous policy effectively ruled out pets in its accommodation, but its current policy makes the keeping of pets normally permissible. The feedback has been entirely positive. The council has told me that it would be glad to advise other authorities that might be considering a similar change. Organisations such as Help the Aged, Age Concern, Pathway and the Anchor Housing Trust have recommended guidelines that can help.
	The Cinnamon Trust has gone beyond that and produced a comprehensive publication of pet-friendly homes; it gives ratings to the top 500 establishments visited by the trust's assessors. I was delighted to visit Elm House nursing home in my constituency of Broxtowe. It has a five-star rating for the criterion "Welcoming any owner and their pet with caring, friendly staff". I saw the dramatic effects that the home's cat, budgerigar and visiting pets have on the lives and reactions of long-term residents with physical and mental disabilities.
	The Cinnamon Trust also has a national network of more than 10,000 community service volunteers who provide practical help when day-to-day care is an issue. Volunteers from another group, Canine Concern, bring in formerly homeless dogs that they have adopted as individual pets to visit patients. The animals are a positive therapy in recovery; as the National Institute for Health and Clinical Excellence has recognised, that can often be the case.
	In preparing the Bill, I have been helped by many colleagues with personal experiences. My hon. Friend the Member for Colne Valley (Kali Mountford) tells me that her mother was allowed a visit from her dog only once after she went into care, and would have liked so much to have had more contact with her companion from the years before. My hon. Friend the Member for Sheffield, Heeley (Meg Munn) was a social services manager in an area where one Sue Ryder home regularly brought in a much-loved cat to cheer up the residents.
	My Bill will address a problem that remains general. Today I met Brenda Eustace, an elderly resident in London who was unable to find a home willing to take her small pet dog and who, as a result, could not go into care. We need to end the postcode lottery and to come to the aid of elderly people faced with this trauma. I commend the Bill to the House.
	 Question put and agreed to.
	 Ordered,
	That Dr. Nick Palmer, Miss Ann Widdecombe, Mr. Ian Cawsey, Mr. David Blunkett, Meg Munn, Andrew Rosindell, Mrs. Linda Riordan, Paul Flynn, Mr. Denis MacShane, Mr. Roger Gale, Ann Clwyd and Judy Mallaber present the Bill.
	Dr. Nick Palmer accordingly presented the Bill.
	 Bill read the First time; to be read a Second time on Friday 16 October and to be printed (Bill 129).

Finance Bill

Further consideration of Bill, not amended in the Committee, and as amended in the Public Bill Committee.
	 [Relevant document: The Twentieth Report from the Joint Committee on Human Rights, Legislative  Scrutiny: Finance Bill; Government Response to the Committee's Sixteenth Report  of 2008-09, Coroners and Justice Bill (certified inquests), HC 882 .]

Clause 17
	 — 
	Rates of air passenger duty

Greg Hands: I beg to move amendment 1, page 11, line 32, at end insert—
	'(4) The Treasury shall, no later than the date of the Pre-Budget Report 2009, bring forward plans to replace Air Passenger Duty with a per-plane tax.'.
	Let me start by outlining the Opposition's overall approach to air passenger duty. We believe, and have said repeatedly, that the duty should be levied on a per-plane basis, not a per-passenger basis. That allows a stronger link with emissions and other environmental impacts; after all, we are talking about what is, or should be, an environmental tax. Furthermore, levying on a per-plane basis allows the possibility of including freight and corporate aircraft, which have environmental impacts that can be as severe as those of commercial airliners, as well as transfer passengers, who are currently exempt from APD.
	We also note the Government's proposals for huge increases in APD this November and next. We regret that at a time of big rises in APD, the Government have not, thanks to their ineptitude, found the time or inclination to reform air passenger duty in its entirety. Instead, the only real reform—the new division of the world into four bands, based on the location of a country's capital city—is a botched job, drawn up by someone in the Treasury armed only with a drawing compass and no common sense. I shall return to the Government's four-zone plan.

Sarah Teather: Does the hon. Gentleman agree that those arbitrary zones have created a number of unfair anomalies? Most notably, people travelling to the Caribbean will have to pay a higher tax than those travelling further—to Hawaii, say, or to other areas around the west coast of the US. People in this country feel angry about that.

Greg Hands: I thank the hon. Lady for that intervention, and she is absolutely right. I have had considerable correspondence on the issue and have met a Jamaican delegation, including the Jamaican Prime Minister, that came to see us at the all-party Caribbean group. What the hon. Lady has mentioned is a real and serious concern among people in the Caribbean, especially those who fly to and from the islands visiting friends and relatives—the VFR flight community, as it is known. I shall come to some of the anomalies in the system, but I can say now that the Caribbean is probably the biggest loser from the Government's four-zone plan.

Peter Bone: If a per-passenger duty were imposed on cars, it would be paid four times if four people using a car pool system went in a car together, but only once if a single person used a car; we might end up with four cars, rather than one, on the road. That is the parallel, and it makes nonsense of the Government's position.

Greg Hands: My hon. Friend is right. That is why our amendment 1, a much more logical and environmentally friendly alternative, would mean that air passenger duty was charged on a per-plane basis. The per-plane duty would also see the early demise of the brave new quadripartite world that the Government have described in schedule 5.

Graham Stringer: I understand the environmental arguments that the hon. Gentleman is putting forward. However, can he tell us of any studies of which he is aware, or which the Conservative party has commissioned, that show the economic impact of proposals for a plane duty on regional airports and what a plane tax would do to the air cargo industry?

Greg Hands: I thank the hon. Gentleman for that intervention. He raises two very reasonable questions, which the Government considered in their response to their consultation. Unfortunately, their response did not put forward any reasonable arguments against a move to charging on a per-plane basis. On regional airports, a lot depends on how we would assess the per-plane tax and how the administration would be run. I believe that a system could be designed that did not discriminate against regional airports.

Graham Stringer: The studies carried out by Manchester airport and other parts of the industry show that it would be extremely difficult for the major regional airports to attract long-haul passenger flights if this were done on a per-plane basis. They also show—I am speaking from memory—that 80 per cent. of freight business in regional airports would go into deficit and would, in effect, be unable to trade for a profit. Will the hon. Gentleman consider that?

Greg Hands: I thank the hon. Gentleman for that intervention. I am perfectly willing to look at any papers that have been produced by anybody on this subject. I just think it is a pity that the Government failed in their own consultation to give proper consideration to those questions.
	Let me try to explain why the Government have not seen fit to opt for a per-plane duty. At the beginning of last year, they appeared to agree with the Opposition that taxing per plane would be a better option to penalise flights that run near-empty and a better means of recognising that the plane causes the emissions, not the people. A per-plane tax might also allow tax incentives to be given for more environmentally friendly planes, which could never easily happen with a per-passenger tax. The Government then got into problems of their own making on questions of definition and administration, so the 2008 pre-Budget report ran up the white flag. Nevertheless, when they originally launched their consultation in January 2008, the policy was absolutely clear. According to the consultation document, they would
	"replace air passenger duty with a duty payable per plane rather than per passenger."
	In case of doubt, the document went on:
	"This reform will take place on 1 November 2009, and has the objective of sending a better environmental signal, and ensuring that aviation makes a greater contribution to covering its environmental costs, while ensuring that a fair level of revenue continues to be raised from the sector in order to support public services."
	The document described as a "principle" the need to provide
	"incentives for the more efficient use of planes by taxing similarly sized aircraft the same, no matter how full the plane".
	We entirely agree with those sentiments as laid out by the Government last year. The Finance Act 2008 provided for certain powers to proceed in that direction. This time a year ago, Ministers again committed to a per-plane tax, with only the final details open to change—yet six months later, the change was total.
	The Government's U-turn was set out in a document entitled "Aviation duty: response to consultation", which was published with the pre-Budget report last November. It makes for interesting reading, and offers sorry excuses where they are provided at all. We can agree that member states' decision in October to include aviation in the EU emissions trading scheme was a significant development, but the Government have acknowledged the ongoing case for a UK tax along the lines of the ETS. So the response document was left claiming that the U-turn in November was
	"consistent with the Government's objectives to provide additional support to businesses and individuals in the short-term and maintain action on climate change".
	It was certainly not consistent with the Government's previous environmental analysis, but one might infer from the talk about supporting business that it was welcome within the industry. However, one struggles to see how. Every airline and every travel company has condemned the proposed changes; meanwhile, environmental groups attack the abandonment of the per-plane alternative.

Jeremy Browne: I hope that this intervention is factually accurate. I have been told that in 2006—which is, after all, in the lifetime of this Parliament—the head of the Conservative transport policy review called for air passenger duty to be increased to £20 for short-haul flights and to £100 for long-haul flights. How does the hon. Gentleman reconcile that position with the position that he is taking, or is this a reasonably recent conversion on the part of the Conservatives?

Greg Hands: There has been no conversion at all. That was the view of a transport policy group, but for as long as I can recall being involved in these matters it has been the official policy of the Conservative party to back a per-plane tax.
	Let us look at the extent of the proposed changes in air passenger duty in clause 17 and schedule 5 to try to understand the scale of the Government's proposals, because there is a link with the failure to move towards the per-plane tax. Because the Government had budgeted for raising revenue from freight and corporate and other aircraft, and from transfer passengers, and that business did not deliver on that revenue, there was a huge shortfall that had to be made up in the air passenger duty figures—hence the huge increases outlined in schedule 5 and clause 17.
	Currently, there are two levels of APD. Roughly speaking, there is one rate for flying to a UK or other EU destination and another rate for flying elsewhere. As part of the climb-down, the pre-Budget report proposed replacing those two rates with four rates, making all flights more expensive but with the really big duty increases imposed on long-haul flights. The existing two-band regime becomes the four-band version laid out in schedule 5 and new schedule 5A, with all rates significantly higher than at present. Under the status quo, the first band is currently £10 per passenger for economy and £20 for all other classes. The long-haul band, which includes all the territories in parts 2, 3 and 4 under the new schedule, is £40 and £80 respectively—for economy class, on the one hand, and all other classes, including, interestingly, premium economy, on the other.
	The four new bands start with part 1, which is similar to the existing short-haul band, with rates going up in November 2009 by 10 per cent. to £11 and £22. It now includes the Maghreb countries and Russia west of the Urals. New part 2 territories include north America, Egypt, the middle east, eastern Russia—that is, east of the Urals—and Pakistan. From November 2009, those rates will be £45 and £90—a 12.5 per cent. rise on the status quo. Returning to the point raised by the hon. Member for Brent, East (Sarah Teather), part 3, which includes the Caribbean, will be banded at £50 and £100—a 25 per cent. rise on the status quo. That band also includes India, China, Japan and much of Latin America. The rates for part 4—it is not actually defined as such but covers all the territories not in parts 1 to 3, including Australasia, Argentina, Chile, Bolivia, Peru, some other smaller south American countries and the Falkland Islands—will be £55 and £110: a huge 37.5 per cent. increase on the status quo.
	Even more importantly, the Government are programming further big rises—far bigger than those this coming November—for November 2010. Part 1 charges will go up to £12 and £24, part 2 charges will go up to £60 and £120, part 3 charges will go up to £75 and £150, and part 4 charges will go up to £85 and £170. Those are huge increases. Air passengers from the UK will be cursing Labour's economic mismanagement and the fact that owing to the Government's botched reforms and failure to opt for a per-plane duty, all aviation except commercial passenger aircraft will be exempt from APD. In the next 18 months, for economy class passengers, those flying to popular destinations such as France or Spain will face a 20 per cent. tax hike, those flying to Florida will face a 50 per cent. increase, those flying to the Caribbean and India will face an 87.5 per cent. increase, and those flying to Australia will face a whopping 113 per cent. increase—a more than doubling of the tax take.

Sarah Teather: People who travel to India and the Caribbean often do so because they have family living abroad—they are not necessarily going on expensive holidays. That is not to say that people do not go on holiday to those destinations, but a large proportion of those travelling there do so for family reasons—to attend weddings or funerals, or merely to see grandparents.

Greg Hands: The hon. Lady makes a very fair point. That is why many of those routes are called VFR routes, standing for "visiting friends and relatives". They are important for that reason. Of course, tourism is very important to the Caribbean and somewhat important to India, but we should not lose sight of the fact that for many people in our communities in this country, those are important routes for family or personal reasons as well.
	Many will ask whether the increases—rates are being as much as doubled in some cases—are really an environmental tax, or whether they are simply a stealth tax with the most tangential link to emissions. Let us examine for a moment some of the peculiarities of the Government's new four-band regime. The existing two bands—Europe and all other countries—at least make some kind of sense and possess simplicity. The new bandings have no justification at all, as they are based on the distance of a country's capital city from London. The world is divided into four bands, of capital cities up to 2,000 miles away, up to 4,000 miles away, up to 6,000 miles away and beyond 6,000 miles away.
	Some 20 years after the fall of the Berlin wall, the Government's division of the world into four zones reminds me somewhat of the arbitrary nature of the division of Berlin into four zones in 1945. That made sense at the time to someone taking a short-term view and poring over a map, but clearly only somebody with no idea about the geography and no familiarity with the facts on the ground, or indeed in the air, would not realise that the new bands will throw up a whole host of new problems.
	Some countries and regions are big losers for no clear environmental reasons. We should remind ourselves that this is supposed to be an environmental tax. Because the US capital is on the east coast and within 4,000 miles of London, all flights to the US, including to the west coast, or even Hawaii or Alaska if there were direct flights there, are assessed as being in band 2. Meanwhile, as has previously been mentioned, the Caribbean is in band 3 and flights there will be subject to 25 per cent. more tax than those to the USA from November 2010. Flights to India will be taxed at 25 per cent. more than flights to Pakistan. Indeed, Bangladesh would be better off still being part of Pakistan, as APD would 25 per cent. lower.

Diane Abbott: Does the hon. Gentleman agree that if so-called green taxes are to have public acceptability, they must be clearly based on environmental arguments rather than being crude revenue-raising devices?

Greg Hands: The hon. Lady makes precisely my point, perhaps somewhat more succinctly than I am making it. By not creating an environmental tax but instead introducing an arbitrary and discriminatory schedule, the Government are making a huge mistake.
	I have one final point about south Asia. Flights to Kashmir, if there were such things—it is quite possible that there could be in future, or that there could be charter flights—would leave the airline concerned having to make the intensely political decision as to whether its destination was in band 2, as part of Pakistan, or band 3, as part of India.
	The schedule sets out a crazy scheme. Destinations such as the Caribbean, India, Bangladesh and Sri Lanka are some of the biggest routes for VFR passengers, many of whom have said that the Government are introducing deliberate discrimination against the Commonwealth. As has been mentioned, their approach has provoked uproar in the Caribbean. The Jamaican Prime Minister, Bruce Golding, whom I have mentioned, and Tourism Minister Ed Bartlett made a special visit to the UK purely about this one issue during the Committee stage, to urge against the Government's new four-zone banding scheme. They pointed out that there was no environmental or economic reason why flights to the Caribbean should be taxed 25 per cent. higher than those to Florida, or to the US or Canadian west coast.
	Interestingly, the new 787 Dreamliner will be able to fly directly from London to Hawaii, yet those flights, which would be some 7,200 miles, will attract 25 per cent. less APD than flights to Kingston, Jamaica, which, at 4,693 miles, are 50 per cent. shorter in distance. As I understand it, 60,000 members of the UK Caribbean diaspora have signed a petition against the Government's plans, which are an extremely unpopular measure.
	We debated this matter a little in the Public Bill Committee. The last but one Exchequer Secretary, the hon. Member for Wallasey (Angela Eagle), did not seem to understand what hurt and upset her comments about the Caribbean would cause. She said in response to my speech:
	"He mentioned Caribbean communities. We are aware of their circumstances and we are listening to their representations. Clearly, it mainly involves the anomaly of Hawaii."
	I mentioned Hawaii merely because that is the most extreme version of the anomaly, but the anomaly is not Hawaii, but the four-zone schedule covering the whole world. Anyone who has a sizeable Caribbean community in their constituency—I have one of the largest—will know that the Caribbean tourism market, even ignoring VFR flights for a moment, competes mainly with Florida. The Caribbean will now be taxed at 25 per cent. more than its US competitor. Those who visit friends and family in the Caribbean will be similarly clobbered.
	To return to the hon. Member for Wallasey and her shaky geography, she explained how we managed to have a position whereby Russia was divided into two zones. I asked her why we could not simply divide the US, for example, into two zones. She said:
	"Well, clearly the US is a slightly different issue as its main land mass is much shorter than Russia's. If one includes Honolulu, it gets slightly longer."
	That is extraordinary, as it implies that Honolulu is somehow on the main US land mass. She said:
	"If one did it on a line between Boston and Honolulu the split would be somewhere in the middle of the Ocean." ——[ Official Report, Finance Public Bill Committee, 2 June 2009; c. 166-167.]
	I was thinking of getting out a globe, if we were allowed visual aids in Committee, to show that the halfway point between Boston and Honolulu was nowhere near any ocean, but right in the middle of the United States.

Jeremy Browne: Is it not the case that if one starts at Greenwich—very close to where we are today—the far extreme of the United States at the end of Alaska and the far extreme of Russia are almost exactly the same distance away?

Greg Hands: The hon. Gentleman makes a very good point. Interestingly, both those territories are in part 2, but logically they should be in part 4 because, by definition, they are the furthest points from Greenwich. Yet the Government are saying that they are as close as Egypt. That is some of the craziness involved in the schedule.
	We also need to examine the environmental arguments for having a per-plane duty, which is the point of the amendment. The reaction of environmental groups to the abandonment of that policy has been mixed. Many welcomed the headline rises in APD, which they thought would combat excessive use of aviation, but, like us, decried the abandoned attempt to find a per-plane methodology. Friends of the Earth responded:
	"The rises in APD are welcome, but should be seen in the context of the abandoning of per-plane aviation duty."
	Greenpeace stated:
	"Plans to tax flights instead of people would have encouraged the industry to fill their planes instead of flying half-empty jet liners around the world...Once again the aviation industry has been given a free pass at a time when its contribution to climate change is rising."
	Nobody was satisfied with the Government's climbdown.
	Why have the Government rejected the per-plane tax? To return to the Exchequer Secretary before last, the hon. Member for Wallasey, she told the Public Bill Committee:
	"We had hoped to proceed with the per-plane tax, but we decided against it for a fair number of reasons...It was not thought to be the best time to shift from one tax to a completely redesigned one, given the uncertainty in the economy."
	She added:
	"we wanted to avoid the disruption and costs associated with a transition to a new tax right in the middle of a period of economic uncertainty that did not exist when the original change was announced." —[ Official Report, Finance Public Bill Committee, 2 June 2009; c. 164.]
	Those are curious justifications, because to return to the point made by the hon. Member for Manchester, Blackley (Graham Stringer), apart from the state of the economy, no detail at all given was of why the per-plane duty had been rejected. In fact, the Government said that they had suspended the move because of the change in the global economy, but of course the credit crunch began many months before the original consultation was even launched.
	When the Government were thinking about embarking on a per-plane duty, in the early months of 2008, the economic difficulties were already happening. The Northern Rock crisis had already taken place, some months earlier. The consequences of their decision are dire. The move to a per-plane tax, which would bring in most other forms of aviation, was slated to raise much more in revenue and be a genuinely environmental tax, but the Government choked in the middle of last year and were left to make up the revenue shortfall by clobbering air passengers. The result is what we are considering—the huge hikes in clause 17 and schedules 5 and 5A.
	The reason for the climbdown is that the Government were too busy elsewhere to drive through the necessary reforms once they had started the process. It is difficult to sell to the general public a big increase—a huge increase, in the case that we are considering—in air passenger duty without reforming the system to make it a genuinely environmental tax.
	We want the following to be done. First, we want the duty to be linked to the pollutant—the plane—rather than directly to the passenger. Secondly, empty or near-empty aircraft should be taxed at the same rate as full ones. Thirdly, the tax should logically be extended to transfer passengers, who fly in and out of a UK airport. There is no logic to a system whereby the only passengers who fly in and out of the UK tax-free are those who do not live, work or visit here. Fourthly, the Government's four-band system must be axed. It is arbitrary and discriminates against important UK partners such as India and the Caribbean for no good economic or environmental reason. Fifthly, other forms of polluting aviation need to be brought into the air duty regime, notably corporate jets, parcel services and other freight. Finally, the tax should encourage a move to cleaner aircraft. Ironically, higher APD will probably make that less likely as airlines become even more cash-strapped, and less able to invest because more of their money goes towards APD.
	Most of all, we argue that if there is to be a big hike in the tax take from the sector, now is the time not to postpone reform but to make it happen.

Diane Abbott: I want to speak specifically about the effects of the ill-thought-out proposal for air passenger duty on flights to the Caribbean—a region with which this country has long-standing historic ties. Here and now in the 21st century there are big populations of Caribbean origin in our great cities and communities, who are looking to what we shall say and do about this matter.
	Before I consider in more detail the problems with the APD proposals, I stress that I entirely accept the environmental argument for some sort of taxation on the sector. The environment is a huge issue in my constituency: I probably get more letters about the environment and climate change than about any other matter. For our children, it is vital that we in the House have the courage to make the right decisions for the future.
	Climate change is also a big issue in the Caribbean, which has experienced hurricanes more regularly in the past two years than ever before. There is no question but that that is a consequence of climate change, which has also led to rising seas throughout the region—a real threat to a series of small island states. Of course, the environment is the Caribbean's biggest asset.
	I am committed to fighting climate change and bearing down on carbon emissions, and so is the Caribbean. It is in the Caribbean's self-interest to do that. However, precisely because I am committed to combating climate change and to my Government's taking serious action on climate change and carbon emissions, I want any proposal for APD to be based fairly and squarely on genuine environmental arguments, not to be a mere device for raising revenue.
	The Caribbean has historic ties to this country, and it is particularly hard hit by the proposed four-zone system. Perhaps when Treasury Ministers and the fabled Treasury civil servant with a compass were working out the system, the Foreign Office said, "Well, I wouldn't worry too much about the Caribbean; it's a middle-income region and it can take the hit." In my time in Parliament, I have heard time and again from Foreign Office officials that the Caribbean is a middle-income region and that the focus of UK attention should therefore be much poorer countries.
	It is worth saying in the House that even though gross national product and so on may give the Caribbean the appearance of a relatively prosperous region, it has poverty to rival any on the globe. Furthermore, it faces a particular economic crisis after the collapse of its traditional commodities—sugar and bananas—through globalisation. Apart from providing foreign exchange and helping businesses flourish, those traditional commodities meant the employment of unskilled and semi-skilled male labour, and the Caribbean is finding them difficult to replace. The problems of systemic unemployment among young males are known even in a developed country such as ours.
	As well as the collapse of traditional commodities, which not only made money for the region but provided employment, the Caribbean also suffers from the current credit crunch and financial crisis. For example, bauxite, which is one of the main foreign currency earners in Jamaica, has collapsed. More than ever, the Caribbean is looking to tourism, not only to provide foreign exchange and not just as business, but to create work. If there is systemic worklessness among the population in countries such as the Caribbean, the ensuing social problems have the power to affect us here in Britain.
	The Caribbean is relying on tourism as never before. Yet that is the point at which my hon. Friends are choosing to introduce an arbitrary system of zones, which hits the Caribbean and will result, as we have heard, in APD nearly doubling in the next 18 months. That puts the Caribbean at an arbitrary and unfair disadvantage in comparison with one of its key rivals for tourism from the UK, Florida. Clearly, not even the fabled Treasury official with a compass thought of that when the scheme was devised.
	Ministers may say that the sums are relatively small for those flying to their villas on the north coast of Jamaica and ask, "Why is there all this fuss?" As we have heard, both Prime Minister Bruce Golding and Minister of Tourism Mr. Bartlett have been to London to explain to hon. Members and Members of the other House the effects of the changes in APD on tourism.
	Let me say a little about the consequences for people from the Caribbean flying home. I speak with some feeling about that because I fly to Jamaica nearly every year at Christmas, and the planes are packed—not with people like me, who can fairly well afford the fare from income, but with those who earn a fraction of what most Members earn and are trying to take home their entire family, perhaps four, five or six people. Some have saved for a couple of years out of small incomes.

Andrew Slaughter: My hon. Friend is making a good point, which has reached the nub of the issue. The Opposition have overstated their case by attacking the whole concept, but I hope that my hon. Friend agrees that the Government need to reconsider the anomalies in the system, which penalise some countries, such as those in the Caribbean—we have heard about others—in a logically ridiculous and unfair way.

Diane Abbott: I entirely agree. The system that the Government propose does not bear examination. I repeat that the sums may be relatively small for those travelling club class to a top resort on the north coast of Jamaica, but they are large sums for my constituents, who perhaps save for a year or two out of tiny incomes. I cannot for the life of me understand why the Government would want to penalise minority communities in our big cities from the Caribbean and Asia in that way, because people will find the sums involved onerous and hard to afford.

Sarah Teather: The hon. Lady is giving a very good speech and I absolutely agree with the points that she is making. The briefing that the Caribbean Council has sent to all MPs says that a family of four travelling economy to the Caribbean—not club class, as she suggested—will pay £300 extra in 2010. That is a substantial amount of money.

Diane Abbott: We have to look at the incomes that people are earning. We are largely talking about people who are in low-paid public sector jobs or other low-paid sectors of the economy, and for them £300 is a lot of money. Having to find £300 extra to see their aunties or grandparents at Christmas or attend a wedding or funeral will cause real pain for families in my constituency, as well as people in Birmingham, Manchester and other places.
	The other thing to say is that sometimes an arbitrary distinction is made between tourism and travel by friends and relatives. Jamaica could not sustain itself without the money spent by relatives who go home regularly and, for example, give money for school fees or invest. The economic consequences for the Caribbean are therefore serious.
	As the House has heard, the system also seems to be wholly arbitrary; it really is a case of a Treasury civil servant with a compass. It means that people will pay more air passenger duty going to the Caribbean than they will going to Hawaii. It scarcely makes sense to have the whole of north America in the same zone, when America stretches from the Pacific to the Atlantic.

Peter Bone: The hon. Lady is making a powerful speech. Is not one of the unintended consequences of the measure that people will fly to Miami and then change planes to fly down to the Caribbean? That will mean taking two flights and causing much more pollution, so I am not sure that the Government have thought the measure through.

Diane Abbott: Absolutely. As someone who flies to Jamaica most years, I can tell Ministers that travel agents will recommend, particularly to families visiting relatives, that the cheapest way would be to take a cheap flight to Miami and then take another flight onwards. That will not help with emissions; in fact, it will make things worse. That is another indication that Ministers need to look at the proposal again.
	The proposal has already caused much unhappiness in Caribbean countries—we have heard about the Prime Minister of Jamaica and other regional leaders who are concerned—and among the Caribbean community here. I have received many letters from people who have been made aware of the issue and are concerned. They cannot believe that a British Government are seeking to penalise people from the Caribbean in that way. However, I would like to put on record my thanks to the Chancellor of the Exchequer, who met a small group of us earlier this week to discuss the issue. I am glad that the Government are at least listening.
	In conclusion, the Caribbean has historic ties with this country and important community links. To go forward with the air passenger duty in its current form would send an unfortunate signal to those in the Caribbean community about the respect and concern that the Government have for them. It is not too late to revisit the proposal. All of us in this House understand the environmental reasons behind it, but I hope that enough has been said in this debate to make the Government understand that the four-zone system is widely seen as unfair and not seriously based on environmental considerations, and that it will have disproportionate effects on key supporters and Commonwealth countries, including India and Pakistan, as well as those in the Caribbean. For the sake of my constituents, the Caribbean community in this country and Caribbean leaders, who have gone to enormous trouble to make their case, I urge Ministers to reconsider the proposal.

Jeremy Browne: Thank you for giving me an opportunity to speak to amendment 1 and all the issues that are thrown up as a consequence, Madam Deputy Speaker. I congratulate the hon. Member for Hammersmith and Fulham (Mr. Hands) on the intelligent way in which he set out the arguments. I also congratulate the hon. Member for Hackney, North and Stoke Newington (Ms Abbott) on making in such a compelling fashion the case that I, too, wish to make.
	There are two main arguments that I wish briefly to explore. The first is about the desirability, in the view of my party, of having a system of aviation taxation based on each plane that travels, rather than on each customer who travels. It is worth momentarily setting the context for that policy preference. Aviation in the United Kingdom is an increasingly large contributor to the overall output of carbon dioxide. Six per cent. of the UK's total carbon dioxide emissions now results from aviation, and that figure is rising rapidly—far faster than, for example, the contributions made by other forms of transport or by buildings to overall CO2 emissions. There is therefore an important issue to address. How can we try to ensure that the projection of rapidly increasing CO2 emissions is limited, rather than rising inexorably in the years and decades ahead? Most people accept that CO2 emissions resulting from aviation are likely to grow as a proportion of CO2 emissions overall. The key is to try to ensure that they grow more slowly and make up a lower percentage of overall emissions than they would otherwise.
	For that reason, our desire as a party is to try to find a system that allows people to fly—we realise that in many circumstances, although not all, people need to fly for work or leisure—but that ensures it is done as efficiently as possible. I thought that the analogy drawn by the hon. Member for Wellingborough (Mr. Bone) was a good one—perhaps it is sometimes easy to think of such matters in quite straightforward terms. A car with four people in it is obviously a much more efficient way of transporting four people from A to B than four cars each with one person in. It is for that reason—a reason that is, I admit, partly to do with congestion, but partly to do with helping the environment—that some councils have explored the possibility of reserving lanes for cars with two or more passengers, because we need to be more efficient and intelligent in using CO2-emitting fuels.
	On the same principle, it would clearly be desirable to have planes filled to capacity, or at least to give airlines the incentive to fill them to capacity where possible. The issue is therefore about incentivising those companies, partly to make their planes fuller but partly not to continue with this strange system whereby planes are flown around empty in order to get them to different destinations—that may sometimes be necessary, but it is reasonable to try to incentivise airlines to do it as little as possible—and partly also to introduce more fuel-efficient planes. I recognise that the Government's policy will create those incentives. However, having a per plane duty rather than a per passenger duty will create even greater incentives than the Government's system.
	The hon. Gentleman also made the point that we should try to ensure that we do not create perverse incentives for customers to avoid the system that the Government are putting in place by taking a short-haul flight and then a long-haul flight, or vice versa. One always needs to consider when looking at such systems whether people will find ways around them that may be economically advantageous to them, but which will undermine the basic environmental policy that the Government are seeking to promote. That is the background to the issue.
	The second part of my speech relates to the issue that has been so eloquently discussed by the hon. Members for Hackney, North and Stoke Newington and for Hammersmith and Fulham—namely, the division of the world into four bands for the purpose of assessing levels of air passenger duty. The hon. Member for Hackney, North and Stoke Newington said that the system was arbitrary, but it is not entirely so. There is a method to it. The lines that have been drawn are straight lines, not jagged or wobbly ones. What is strange about the system is that its consequences do not appear to have been fully thought through.
	There are a number of anomalies in the system, and the hon. Member for Hammersmith and Fulham has been particularly imaginative in thinking of potential pitfalls in the system being proposed by the Government. The overwhelmingly obvious anomaly is the one that has been raised by my hon. Friend the Member for Brent, East (Sarah Teather), the hon. Member for Hackney, North and Stoke Newington and others—namely, the fact that the Caribbean is in a different band from the United States.
	In an era in which anyone with a computer can put in the names of two cities and find out precisely, to the nearest metre, the distance between them, it seems strange that we need to base the system on capital cities. It would be perfectly feasible to base it on the actual distance of each flight. We could have a tax system that charged a number of pence per mile, for example. Or, if that were too complicated to administer, we could have a banding system in which the bands applied to each individual flight, rather than to the country that was being visited and to the location of the capital city in that country. The situation becomes particularly anomalous when the country in question is very large, because the capital city might be located in an area that is unfavourable to travellers—or, indeed, in one that is more favourable than the rest of the country.
	I wonder why the capital city has been chosen as a measure. We were talking about the United States of America earlier. Los Angeles, which is eight time zones away from London, is a much bigger city than Washington DC, so why is Washington DC regarded as the most suitable point for judging the tax level of journeys from the United Kingdom to the United States? New York would be just as good an example, or Chicago. There are any number of cities in the United States that are bigger than Washington DC, which is not a tourist destination for many people. Far more British people go to Florida, for example, which is further from here than Washington is. It is slightly strange that the Government have chosen to use capital cities as a measure, and it is reasonable to ask them to look again at whether this is the best system to use.
	I would like to suggest an alternative system. I understand that paying more tax to travel further is a reasonable proposition. I do not doubt that there are people on low incomes who wish to travel to distant parts of the world, but most of us accept the need to reflect the environmental damage done by long-haul flights. It is the anomalies in the system that people are uncomfortable with.
	I do not know whether the Minister, in the short time that she has been in her job, has had the opportunity to consult her officials and other Ministers and to consider an alternative system. If she is attached to the idea of four bands, we could keep them, but each individual flight could be assessed within those bands. There is only a limited number of destinations that one can fly to directly from the United Kingdom, and it would take very little time to assess any new routes that came into effect. In that way, the Government could retain the simplicity of a banding system—they could introduce more than four bands if they wished to do so—but each individual flight could be assessed within one of the bands.
	Such a system would avoid two places that were close together being banded separately. It would also avoid the even more anomalous situation—the example of the Caribbean and the United States has been mentioned—in which places that are much further from the United Kingdom are placed in a lower band than places that are more proximate to us. I hope that the Minister will consider that proposal, for reasons of fairness as well as for environmental reasons.

Peter Bone: On the environmental issue, there is a further perverse effect. Most environmental damage is done on take-off and landing, so short-haul flights are, by their nature, much more environmentally damaging. They are often used as an alternative to going by rail. If we are concerned about the environment, perhaps we should be concentrating more on short-haul flights than on long-haul flights, to which there is no such alternative. Furthermore, the aircraft used on long-haul flights tend to be the most efficient.

Jeremy Browne: I am grateful to the hon. Gentleman for that intervention. Short-haul flights definitely do more damage per mile travelled than long-haul flights, and it is important to look at the alternatives, particularly within the United Kingdom. I accept that the islands of Scotland and perhaps places such as Aberdeen are a considerable distance from London, but it is important to ask whether people should be routinely flying from London to Manchester, for example, when it seems much more sensible to make that journey by rail most of the time.
	The hon. Gentleman's intervention also raises the question whether people might feel incentivised to take a short-haul flight from the United Kingdom before taking a long-haul flight to a destination further away, in order to avoid paying these duties. That means that we will need to consider the tax regimes in nearby European countries. We must also be alert to the risk of creating a system that unfairly penalises some destinations. The example that illustrates the greatest unfairness involves the Caribbean, which is only four or five times zones from here yet is treated for the purpose of this rule as though it were much further away.

Angus MacNeil: The hon. Gentleman is correct in his assertions about short-haul flights. Does he agree that this legislation could present greater opportunities for Schiphol and Shannon?

Jeremy Browne: That is a hazard, but I do not want to go so far as to say that any taxes on aviation will threaten our airline industry if other countries' taxes are lower. The logic of that position would be that we should have no aviation taxes at all, and I do not agree with that proposition. However, we need to have a system in place that incentivises airlines to be more environmentally efficient, and that reflects the polluting effect of flying long haul without building in anomalies that unfairly penalise some categories of passenger and some countries whose economies rely on trade and tourism.

Andrew Slaughter: I am confused, which sometimes happens when I listen to Lib Dem policy. Is the hon. Gentleman agreeing with my hon. Friend the Member for Hackney, North and Stoke Newington (Ms Abbott) that the anomalies in the Government's proposal need to be corrected, or with the hon. Member for Brent, East (Sarah Teather) and the official Opposition, who believe that the whole system needs to be done away with and replaced by a new one, which might be more expensive for people travelling to the Caribbean?

Jeremy Browne: I think I was making myself perfectly clear, but the hon. Gentleman might have chosen not to listen carefully to what I was saying. I have made two points. One was that I disagree with the Government's view that we should tax per passenger; I think that we should be taxing per plane. I hope that that concept is straightforward and easy to understand. I disagree with the hon. Member for Hackney, North and Stoke Newington that the system is arbitrary.
	My second point relates to the bands of 2,000 miles. Everyone can agree that the capital cities are within those bands, but I believe that that is a bad way to run the system. I was suggesting that the distance covered by each individual flight should be measured. For example, we could measure the distance between London and Kingston in Jamaica, and the distance between London and Miami. I suspect that they would both fall within the same band, under a new banding system. That would be far less anomalous than the present system, in which a flight from London to Miami is judged according to the distance between London and Washington DC. That seems to be a very strange system.

Diane Abbott: The hon. Gentleman may think it is an anomalous system, but a Jamaican nurse who has saved for two years to fly home and finds that she has to pay substantially more in air passenger duty than someone who is flying all the way to Los Angeles would think the system looked pretty arbitrary.

Jeremy Browne: I do not want the hon. Lady to misrepresent my position, because I am an ally of hers and it would be a great shame if she thought there was political advantage in pretending otherwise. Both she and I are trying to persuade the Government that it is unreasonable to have a system that charges people more in tax to fly a shorter distance. That is what we are saying, while the Government propose that people should pay more in tax to fly to the Caribbean than they should to fly to San Diego or Los Angeles. I think that that is a bad system and I have made that completely clear. My understanding is that the hon. Lady agrees that it would be better if we based the system on measuring the distance of each flight and taxed either per flight or had a banding system that took each individual flight into account rather than the distance from London to the country's capital city. I venture to suggest that unless the system is extremely complicated, the tax levels for Florida would be the same as for the Caribbean islands, which the hon. Lady would agree to be a fairer system.
	I conclude with this parting shot—I very much hope that the hon. Member for Hammersmith and Fulham presses the matter to a Division. The case is clear cut and there is a genuine grievance, which has been articulated by the hon. Member for Ealing, Acton and Shepherd's Bush (Mr. Slaughter). I anticipate that he will vote with me, my hon. Friends and Conservative Members to try to make the Government think again. The case has also been articulated by the hon. Member for Hackney, North and Stoke Newington, who I also anticipate will join us in the Aye Lobby to ensure that the Government are made to understand that this is a great grievance for many people. We need to come up with a system that takes account of the environmental consequences of aviation but does not at the same time create unfair anomalies that penalise our constituents.

Neil Gerrard: I shall be brief as I do not want to repeat what has already been said.
	Like many hon. Members, I met the Prime Minister of Jamaica when he came here to raise the issue of air passenger duty, so I heard the case that he, his Tourism Minister and the Caribbean Council have made about the effects of the proposed system on the Caribbean. My hon. Friend the Member for Hackney, North and Stoke Newington (Ms Abbott) has gone through the case in detail, so I shall not repeat it all.
	The key issues for the Caribbean are quite simple. The first is the importance of tourism. As my hon. Friend said, the collapse of the traditional economy in the Caribbean—the Jamaican Prime Minister specifically mentioned the collapse in the bauxite market—has made the islands much more reliant on tourism than ever before. Anything that discourages people from flying to the Caribbean, as opposed to destinations nearby such as Florida, will have an impact on the area.
	Secondly, people living in the UK, including British citizens, whose families are still living in the Caribbean and who need to visit them—I have been approached by many people in my constituency about this—are also affected. Tourists have a choice about where they go and are able to weigh up the cost of fares, but the people visiting their families have no such choice; they either visit them or they do not. The only choice they might have is to go via a different route. That could mean, as was mentioned earlier, people taking a short-haul flight to, say, Paris and then flying from there across the Atlantic because it is cheaper, which would not particularly help our airline industry or do anything to deal with pollution. We should be aware that people who need to visit their families may not be at all well off. An increase in passenger duty from £160 to £300 in a couple of years is not an insignificant amount of money for a family of four wanting to make those journeys.
	Let me say a few words about the alternatives. I am not necessarily convinced that the amendment provides the answer; it simply proposes to move to duty per plane. We should be looking at a system more closely connected to distances of flights. I am told that such an approach would cause all sorts of administrative problems, but, frankly, I do not believe it. As was said earlier, we can look up in 10 seconds on Google the distance between any two cities in the world, and all the airlines provide the air miles when we fly—presumably based on the actual distances of the flight.

Sarah Teather: I absolutely agree, and I tabled an early-day motion that incorporated those factors. The hon. Gentleman is right—it is not as if airports get up and move from one week to the next; they are fixed points, so it should not be beyond the wit of the Government to work out how far apart they are.

Neil Gerrard: Almost inevitably, the information is there already.

Jeremy Browne: The hon. Gentleman provides me with an opportunity to clarify my earlier point. I agree with him that it is perfectly possible to judge every single flight on the distance travelled. My point was that if the Government were attached to a banding system, there could be eight or nine bands representing 1,000 miles each, and we could judge individual flights within those bands rather than on the basis of the distance between London and the capital city of the country in question, which is even more ridiculous.

Neil Gerrard: I understand that point. If a system were based on distance travelled, there would be alternative ways of charging; we could take the precise distance into account or have a banding system, for example.
	As I was saying, I do not believe that there will be serious administrative problems; it should not be that complicated. I am also told that there is the problem that the measure might be seen as a proxy for fuel consumption, because the distance travelled would correspond quite closely to fuel consumption, and it is not permitted to tax that. That seems to be the root of the problem, because I would have thought that the amount of fuel consumed must be the best measure of emissions. That has to be the case. If we based the system on that, it would cover the issue of short-haul flights, where less fuel may be used in the air, but the amount used in take-off in comparison with the rest of the journey is disproportionately high. The root of our problem is thus the inability that I am told we have to tax fuel consumption. If that is the case—I assume that it is due to EU or other international regulations—we should take it up and argue about it in order to secure change towards a greener tax for the future.

Angus MacNeil: The hon. Gentleman is making a sensible and cogent argument. Banding of any form will produce problems and anomalies. As he says, we are told that we cannot tax fuel, but does the answer not lie in finding some way to tax fuel and carbon emissions? We should describe the tax we need in those terms. The hon. Gentleman's suggestion of taxing per mile is eminently sensible.

Neil Gerrard: I thank the hon. Gentleman and agree that that is the direction we should be looking towards, irrespective of whether we have a banding system.

David Taylor: The roots of our inability to tax fuel probably stretch back as far as the inter-war Chicago convention—in the early '30s, I believe. We need to make more progress on taxing fuel, as the aviation industry is especially lightly taxed—so much so that Al Capone would be proud to be associated with it. Something has to be done about the problem. The amendment may not be perfect; it may be a proxy for a fuel tax, as my hon. Friend says.

Neil Gerrard: I thank my hon. Friend and agree that we should pursue this line for the future; it is ultimately where we need to be. Such an approach could also deal with the points raised about commercial flights, planes flying empty and so forth.
	I shall not say much more, because I do not want to keep repeating things that others have already said. There is time for the Government to think again. I am not convinced by the amendment as it stands, but the big rises in air passenger duty will come not in 2009-10 but in 2010-11. I hope that, especially in view of what is happening to the Caribbean, India, Pakistan and other destinations that mean quite a lot to many people in this country, the Government will have produced some possible alternatives before the pre-Budget report is presented later in the year, and before the big rises that are due in 2010-11.

Peter Bone: It is a great pleasure to follow the hon. Member for Walthamstow (Mr. Gerrard). He made a valid and powerful point about the need to bear the per-mile damage in mind rather than opting for a banding system. If we can adopt such an arrangement—or something nearer to it—the position will improve greatly, because it will be environmentally friendly.
	Let me begin by referring the House to my entry in the Register of Members' Interests, which states that I am a non-remunerated director of a travel company.
	The Government have got themselves into a terrible tizz over APD. I think that they were right when, a year or so ago, they said that they would introduce a per-plane tax, but they got into an awful mix-up over premium and standard passengers. I remember that they discriminated against tall people last year: for some reason they thought that there were business-class-only aircraft flying around, when in fact all the companies concerned had gone out of business. The Treasury estimated that it would raise an extra £5 million from a class of airliners that did not exist. Having got into a terrible muddle in trying to define the distance between seats according to whether they were standard or premium, it has now included premium and economy seats in the premium APD.
	The real question, however, is whether this measure is a stealth tax, designed purely to raise money for the Government. I fear that, in large part, it is just that. My right hon. Friend the Member for Witney (Mr. Cameron) has taken hold of the Conservative party and shaken it, as he has done in many other contexts: he has brought environmental issues to the top of the Conservative agenda. I fear that APD is not an environmental tax in any sense. If an aircraft is flying to Florida carrying two passengers, they will pay two lots of duty. If it is carrying 230 passengers, they will pay 230 lots of duty. That cannot be environmentally correct. It is as simple and as straightforward as that, and many other Members have made the same point.
	The Board of Airline Representatives in the UK, known as BAR UK, has made a point that has not featured much in the debate about passengers coming into the United Kingdom. Let us suppose that an American says to a travel agent, "I want to go to Europe: where do you suggest that I fly to?" The travel agent will say, "It is several hundred pounds cheaper to fly to Schiphol than to fly to London." I remember that a few years ago there was much talk of Schiphol's being the third London airport.
	It is crazy to put this country at a disadvantage. The Government need to come up with a taxation system that is based on environmental considerations. I agree with the hon. Member for Taunton (Mr. Browne) that there should be a tax on airlines to help to control emissions, but it should not be one that puts our airline industry and our cities at a disadvantage. If it is too high and out of synch with the rest of Europe, it will merely be a stealth tax, but I think that that is the direction in which the Government are moving.

Angus MacNeil: This may support the hon. Gentleman's argument. Surely an environmental tax should have the desired effect of changing behaviour. If the intention is simply to raise revenue, the number of passengers and flights should remain the same. It would be interesting to hear from the Government which of those two options they prefer. Do they plan to change behaviour by reducing the number of passengers and flights, or are they merely using airlines as a cash cow? Banding or a per-mile tax would not be a sensible option environmentally, but it would be a very sensible option if the Government are trying to raise more money for themselves.

Peter Bone: I hope that the Minister will answer that question.
	Let me turn to a more local issue. Many of my constituents travel to the Caribbean, and many more travel to India. My constituency contains a large Indian community. One constituent wrote to me as follows:
	"I am a regular traveller to the Caribbean and I am worried about the impact of the proposed tax increases. From November I will have to pay more in tax to travel to the Caribbean than if I were travelling to the West coast of America or Hawaii. This cannot be right!! Not only when comparing distances travelled but also when you consider that the tax is for green issues.
	This will have a serious impact on my ability and others from the West Indian Diaspora, many of whom live in your constituency, to visit the Caribbean."
	For those people, visiting the Caribbean means visiting home. That is, I think, the point made by the hon. Member for Hackney, North and Stoke Newington (Ms Abbott). Generally speaking, such people are not the wealthiest of my constituents. I have a horrible feeling that we are returning to the system that operated when I was growing up, when air travel was only for the rich. This is a tax on the poor, and it is a tax on people who want to go home to visit their friends or want their friends to visit this country. I do not think that the Government have thought it through at all. I am not sure that they really want to discriminate against people travelling home to the West Indies and to India, but that is the effect of what they have done. Many of my constituents are very unhappy about it, and I ask the Government to think again.

Sarah McCarthy-Fry: I thank all hon. Members who have contributed to the debate.
	As has been mentioned, in 2008 the Government consulted on proposals to replace air passenger duty with a per-plane tax. The amendment proposes that they should bring forward plans for a per-plane tax again. I assure those who tabled the amendment that the Government decided against introducing a per-plane tax at this point only after fully considering the merits of, and evidence for, such a tax. Having considered the evidence and listened to respondents, we announced in the 2008 pre-Budget report that we would instead reform the existing APD regime and change the current two-destination band structure to a four-band structure. As has already been said today and in earlier debates, that decision recognised the need for stability in the tax system in difficult economic circumstances. The reform of APD strengthens the environmental signal of the tax, and raises revenue in comparison with the existing system.

Diane Abbott: Will my hon. Friend give way?

Sarah McCarthy-Fry: I will in two seconds; I want to deal with a point that my hon. Friend made. We have always said that aviation taxation has a dual purpose, dealing with environmental impacts and also contributing to public finances.

Diane Abbott: My hon. Friend said that the Government rejected the idea of a per-plane tax. We know, because it is on the record, that they considered it very seriously, and my hon. Friend has not explained why they rejected it.

Sarah McCarthy-Fry: If my hon. Friend will be patient, I shall come to that in a moment.

John Gummer: The Minister said that the Government had always recognised that the tax should be both environmental and revenue-raising. This measure is very damaging to the environment. The public will accept green taxes if they really are green taxes, and if they are clearly connected with green activities. If they are merely means for the Treasury to raise money, the public will think that they are frauds.

Sarah McCarthy-Fry: I think that I thank the right hon. Gentleman for his intervention. I shall explain later the way in which we are trying to achieve a balance and to send an environmental signal within the constraints presented by reform of the APD system.

Angus MacNeil: The Minister talks about getting the balance right. By what percentage does she hope to reduce passenger and flight numbers as a result of her tax-raising measures?

Sarah McCarthy-Fry: Somewhere in my papers, I have the figure for the reduction in carbon that we expect as a result of the measures. If I cannot find it in time, I will write to the hon. Gentleman.
	We have increased rates for all lengths of flights, but it is right that the rates for those flying to the farthest destinations are higher. That point has, I think, been agreed by all hon. Members who spoke.
	Following consultation with stakeholders, the Government decided not to go ahead with a per-plane tax. Proceeding with the per-plane tax would have raised more revenue, but it was not the right decision at the time. The Government proposed a per-plane tax in a very different economic climate, before the global economic downturn had really begun and before agreement was reached to include aviation in the EU emissions trading scheme. The decision to reform APD rather than proceed with a per-plane tax was taken after considering the potential impacts on regional connectivity and on air freight and the knock-on effects on employment, as well as the need to ensure greater stability in tax policy in times of economic uncertainty and to avoid the disruption and costs associated with the transition to a new tax.
	I now have to hand the answer to the question of the hon. Member for Na h-Eileanan an Iar (Mr. MacNeil). We estimate that our reformed APD will deliver 0.6 MtCO2—million tonnes of carbon dioxide—by 2011-12.

Greg Hands: Can we get it absolutely clear that there are only two reasons for rejecting the per-plane tax in the Government consultation, which are that it would discriminate against regional airports—or so the Minister says, at least—and that she does not want to introduce a disruption in the tax gathering system during a recession? Are those the two reasons, and if so, are they the only two reasons?

Sarah McCarthy-Fry: They are certainly not the only two reasons. Another important reason was the point that I made about the EU ETS, which enables us to have some of the benefits that a per-plane tax would bring. That was another consideration that was taken on board. The full reasons are spelled out in the document, which I think the hon. Gentleman spoke about earlier.

Angus MacNeil: I am grateful to the hon. Lady for her answer a few moments ago, but I seek a little clarification. Is that 0.6 per cent. of the total emissions from UK aircraft or 0.6 per cent. of a million tonnes of carbon? Also, will the efficiency of different plane models be taken into account so that some aircraft could be taxed more or less than others—in other words, will there be an incentive to use more efficient planes?

Sarah McCarthy-Fry: It is 0.6 million tonnes of carbon dioxide in 2011-12.
	My hon. Friends the Members for Hackney, North and Stoke Newington (Ms Abbott) and for Walthamstow (Mr. Gerrard) and the hon. Members for Brent, East (Sarah Teather) and for Taunton (Mr. Browne) referred to the Caribbean. I assure hon. Members that I have carefully considered the many representations I have received in respect of the Caribbean, and I will respond later to some of the alternative suggestions that have been made in the context of our reformed APD. Without seeking to undermine the argument of the hon. Member for Brent, East, I would like to correct a point of fact. She said, I think, that there would be an additional sum of £300 in 2011-12, but it is, of course, an additional £140, and £300 is the total.
	In the context of this amendment, there is absolutely no reason to assume that moving to a per-plane tax would result in less tax on flights to the Caribbean. In fact, implementing a per-plane tax, as consulted on in 2008, would have resulted in more tax being paid on flights to the Caribbean than under the reformed APD. As I have said, I will address later some of the alternatives that have been suggested such as distance flown, alternative bandings and proxies other than capital cities, but I shall first explain why we have chosen the banding system.
	In retaining APD, the Government recognised that the system could improve the environmental signals it provides. The responses to the consultation for the per-plane tax highlighted that aviation taxation should recognise distance flown as a factor. As part of the strengthening of the environmental signal in APD, destinations have been banded in a straightforward, transparent and administratively simple way.

John Redwood: Can the Minister tell us which of the many tax proposals that the Government examined produced the biggest fall in the number of flights?

Sarah McCarthy-Fry: I do not have that information to hand, but I am sure I will be able to get it to the right hon. Gentleman.
	The reform of APD increases the number of destination bands from two to four. These have been set at 2,000-mile intervals, with the distance between London and capital cities determining what band a country falls within. There is a clear rationale that those travelling farther should pay higher rates of APD.
	The hon. Member for Taunton said that short-haul flights are more damaging. Long-haul flights produce more emissions, and a band D long-haul flight on average would emit 14 times more than a band A flight.

Jeremy Browne: I acknowledge that long-haul flights cause more emissions than short-haul flights. My point was that short-haul flights cause more emissions per mile, and that is why we need to try to create alternatives to short-haul flights. I recognise, however, that a system in which the tax is greater for long-haul flights is reasonable because, overall, they cause greater emissions than short-haul flights.

Sarah McCarthy-Fry: I thank the hon. Gentleman for that intervention.
	A geographical banding structure balances the aim of sending a stronger environmental signal with the need to make the reforms easy to implement. The hon. Gentleman and the hon. Member for Wellingborough (Mr. Bone) suggested that people might travel to cheaper destinations, or travel short haul and then get an onward flight. It is often said that people may do that, but there are a number of practical, as well as financial, consequences.
	A passenger with two unconnected tickets for travel will need to land themselves at the first destination airport and then check back in for the second flight, and will be subject to any taxes or charges due for that country. Both airlines will incur handling charges for processing the passenger, and it is likely that they would be passed on to the passenger. Also, a passenger taking a connected flight enters into a contract for travel to their final destination. That offers a passenger some protection against unforeseen delays or cancellations as it is the airline's responsibility to ensure that they reach their final destination. In some cases, that may mean rebooking a passenger on an alternative flight or providing, or paying for, accommodation until a flight is available. Unconnected flights do not carry that same protection, and an airline's responsibility will cease once the passenger has reached the destination specified on the ticket.

Stewart Hosie: Surely the second airline would offer the same contract for the second flight. The level of protection would be precisely the same, it simply would not be provided by the original carrier.

Sarah McCarthy-Fry: Notwithstanding that, there is the gap in the middle at the hub point, because the protection is given to the hub and the passenger does not have the same protection going forward. I think the hon. Gentleman will accept that there is also the additional costs issue—the additional handling charges and airport charges, and the need to land and recheck baggage. That would not make it quite such an easy option, and would not necessarily make it a financially cheaper option.

Angus MacNeil: I am a frequent air traveller. Unfortunately, I sometimes take between four and six flights a week. Are this Government saying that they are going to make life even more difficult for air passengers by ensuring that they have to check in again, and by not ironing out the rough edges? Their journeys are already stressful and annoying enough. Will they get even worse now as result of the consequences of the Government's measures?

Sarah McCarthy-Fry: The measures do not apply within the UK.  [Interruption.] What I am saying is in the context of passenger choice—if they think that, to avoid APD, it would be cheaper and more convenient to travel via a different hub. However, it would not necessarily be so practical and easy, and it would not necessarily be so cheap. If it is a through-flight, the measures do not apply; if they are unconnected flights, they will apply.

Peter Bone: I think that the Minister is not quite aware of the practice. Travelling non-stop—direct—is more expensive, and airlines will try to attract people on an indirect route. Someone may well fly with Northwest airlines to Detroit and then down to the Caribbean, and that will be priced cheaper. That is because the airline is trying to attract people's business and that break in flight is not essential. Interlining happens all the time and there is no difference in protection, because the interlining protection continues through. In practice, the Minister has not got that point exactly right.

Sarah McCarthy-Fry: I will certainly re-examine that, but my understanding is that the situation for two unconnected flights is different from that for a connected flight booked on one ticket.

Diane Abbott: On the incentive to use an interconnecting flight rather than a direct one, people going to the Caribbean—I am thinking, in particular, of families and Caribbean diaspora nationals—will find it tempting to break their flight in Miami. The Minister may not be aware that there is a large Caribbean community there. If it could be done more cheaply, it would make perfect sense to break a flight there and then go on to the Caribbean, and perhaps a couple of days could be spent visiting another set of relatives. I imagined that the environment was the underlying rationale behind the proposal, but a situation such as I have described will not help us with carbon emissions at all.

Sarah McCarthy-Fry: I take my hon. Friend's point, but the point that I am trying to make is that such flights will not necessarily be cheaper because there may be other costs to take into account. It may not be quite as simple as some people have suggested.

John Gummer: Will the Minister explain why it is sensible to have a higher tax on a flight to the Caribbean, given that such a journey can be made only by air, than on a flight to Manchester, which can be reached by train? Would it not be more environmentally sensible if things were the other way around? Has she not got it all upside down?

Sarah McCarthy-Fry: I disagree. I thought that we had a consensus that long-distance flights were more environmentally damaging than short-distance flights.
	Let us move on, because I wish to come to suggestions made to amend our APD system in order to avoid the anomalies. Ticketing systems are based on national territories. As such, it is straightforward to base the tax on countries, and we think that the capital city is the most coherent and principled proxy. Where it is administratively simple to divide a territory at an appropriate point, as in the case of the Russian Federation, the Government have done so. Of course it is possible to determine the exact distances of flights, and I take the point that my hon. Friend the Member for Walthamstow made about the administration of that. Such an approach would be slightly more complex because of the ticketing systems that airlines use, and any consequent increases in cost could be passed on to passengers.
	My hon. Friend was right when he mentioned the Chicago convention and the fact that the distance link might be so closely tied to fuel consumption as to raise questions about legality. He asked that we should focus our attentions on that, and I assure him that the Government continue actively to support international action at the International Civil Aviation Organisation. It administers that convention, which, as someone rightly said, was signed in 1944 and created the framework. The convention has been revised frequently, but we think that it is now in need of modernisation, and that is particularly true in relation to the environment. The UK and other like-minded states believe that the current practice of exempting aviation from fuel taxation is anomalous and we have succeeded in increasing our focus on the environment, but it has not yet been possible to reach consensus in the ICAO on specific economic instruments. I assure all hon. Members that we are committed to engaging actively, together with our European partners, to press for greater action on the environmental impacts of aviation.
	There will be instances in any banding system where a capital falls either just within or just outside a band, or a territory covers a large area. Calls for exceptions to be made for a specific country or group of countries can generally not be met without breaking international law principles of uniform treatment. Making changes in the banding system to change the impact on one group of countries in particular could reduce the revenue from APD, thus requiring the money to be found elsewhere. It could also undermine the environmental signals from the tax and, in addition to legal considerations, it could raise distortion issues with comparable destinations.

Andrew Slaughter: My hon. Friend makes some good negative points about why the Opposition proposals may not work or why, in the case of the per-plane tax, they may even be more expensive. However, she must understand that the anomalies need to be corrected. When my hon. Friend the Member for Hackney, North and Stoke Newington (Ms Abbott) and I saw the Chancellor earlier this week on the matter, he said that it would be re-examined to see whether some of the anomalies, such as those relating to the Caribbean, could be addressed. Will the Minister suggest how that might be done?

Sarah McCarthy-Fry: I was about to come to that. I have asked my officials to consider the matter further. Although my hon. Friend said that my points appear to be negative, I was trying to explain the difficulties and why we have not been able to introduce the proposal until now. That does not mean to say that we are not still looking at it.

Diane Abbott: One of the arguments that the Minister made against doing anything about the zones was that to do so would reduce the revenue. I am genuinely committed to taking action on the environment and to green taxes. The Government must make up their mind about whether the measure is designed to reduce carbon emissions or to produce revenue. Leaving aside the broader question on the Caribbean, which is the thing that concerns me in this debate, I fear that if the Government devalue the notion of green taxes by using them as a cover for raising revenue, the public acceptability of such taxes in future will be much reduced.

Sarah McCarthy-Fry: I certainly take on board my hon. Friend's point but, as I said, we must recognise that we want the aviation sector to pay its fair share towards the public finances. The sector is not highly taxed—it does not pay fuel duty or VAT on fuel—and we have a joint way of ensuring that we can secure a contribution to the public finances while trying to find a sensible way of strengthening the environmental signal. We consulted on the case for a per-plane tax and, as I have said, we decided not to proceed with that.

Angus MacNeil: The hon. Lady is saying that this is a straightforward revenue-raising tax, but it is hoped that it might give an environmental signal. She is saying that the tax is simply about raising money and has nothing to do with the environment. Is that correct?

Sarah McCarthy-Fry: My point is that we are trying to make our reformed APD system give a better environmental signal and better match the distance travelled. We cannot do that under the Chicago convention, which we are trying to change, if the proxy is too close to emissions. The banding system gives a better signal towards that.

Jeremy Browne: Before the hon. Lady finishes her speech, will she engage with my entirely constructive proposal, which is not to abandon her proposal—I understand that she might not wish to do that—but to modify it in a way that addresses the concerns raised by the hon. Member for Hackney, North and Stoke Newington (Ms Abbott), my hon. Friend the Member for Brent, East (Sarah Teather) and others? The Minister could explore the possibility of having eight bands, rather than four, and the determination of which band a plane journey fell in would be made on the basis of the actual distance travelled, rather than the distance from the UK to the capital city of the country. That would ensure that the bands much more accurately reflected the actual distance travelled, while being less administratively complicated than measuring the distance of each flight. We could keep a band system—there would probably be more bands—but the determination would be about the actual journey made, rather than the journey to the capital city. Does she think that that would be a good way forward?

Sarah McCarthy-Fry: We have examined many ways forward along those lines, but so far we have come up with negative reasons, as my hon. Friend the Member for Ealing, Acton and Shepherd's Bush (Mr. Slaughter) put it, as to why that is not a practical way to proceed. As I have said, I have asked my officials to continue examining the matter. We had consulted on the basis for a per-plane tax, but after careful consideration we decided not to proceed—our reasons are outlined in more detail in the document. I therefore ask the hon. Member for Hammersmith and Fulham (Mr. Hands) to consider withdrawing the amendment.

Greg Hands: This has been a wide-ranging and extremely helpful debate on amendment 1, and we have heard from a significant number of diverse speakers on a number of different topics. A number of common themes emerged, the main one being the unworkability of the Government's clause and schedule that we are discussing. The hon. Member for Hackney, North and Stoke Newington (Ms Abbott) spoke passionately and with great knowledge, making powerful points about Caribbean communities and the need to have a more environmental basis to this taxation that I had also made. The hon. Member for Taunton (Mr. Browne) also made a number of important points about the crudeness of schedules 5 and 5A, as well as a number of more general points with which Conservative Members agree.
	The hon. Member for Walthamstow (Mr. Gerrard) commented on the actual distance flown, which I know we discussed at the meeting of the all-party group on the Caribbean. I was interested in the Minister's response that she is looking at ways of reforming the Chicago convention. I would be grateful if she could update the House, at an appropriate time, on how those negotiations are proceeding. My hon. Friend the Member for Wellingborough (Mr. Bone) made similar points about the Caribbean and India, well illustrated with a letter from his constituent, one of the 60,000 people who have signed the petition and written to their MPs.
	The reasons given for rejecting the plane tax amendment are flimsy, as we have seen from the Minister's response and the Government's consultation document. We can have no confidence in the Government's reasoning, which shows a confused logic on whether this is an environmental tax or purely revenue-raising. Several hon. Members raised serious concerns about the particulars and the generality of the Government's proposals, and we would urge a rethink before it is too late. Having said that, we had a Division on this matter in Committee and we are not minded to do so again today, given that we are already two hours into today's proceedings and there are several more groups on the amendment paper. I therefore beg to ask leave to withdraw the amendment.
	 Amendment, by leave, withdrawn.

Clause 20
	 — 
	Bingo duty

Stewart Hosie: I beg to move amendment 4, page 12, line 15, leave out subsection (2).

Mr. Deputy Speaker: With this it will be convenient to discuss the following: Amendment 22, page 12, line 16, leave out '22' and insert '16'.
	Amendment 23, page 12, line 16, leave out '22' and insert '17'.
	Amendment 5, page 12, line 20, leave out '27 April 2009' and insert '1 April 2010'.
	Amendment 24, page 12, line 20, leave out '27 April 2009' and insert '1 April 2011'.

Stewart Hosie: I am delighted once again to make the case for bingo and speak out against the Government's damaging tax increases. We discussed this only a few weeks ago, on 13 May, and I have reread the report of the debate. The then Exchequer Secretary said:
	"We have had a small, boutique, but extremely well proportioned debate".—[ Official Report, 13 May 2009; Vol. 492, c. 977.]
	She was right. It encapsulated every one of the arguments that surround this issue. The hon. Member for Hammersmith and Fulham (Mr. Hands) made an important contribution to that debate, especially given the circumstances of the last week. I shall return to that point later.
	Before I make my argument in detail, I want to say how astonished I was last week when the bingo sector held a demonstration in Old Palace Yard. It was a bright, noisy, colourful demonstration, and it will probably be the first and last time that I ever see people travelling from Caerphilly and Bristol, together with Caribbean dancing girls, to protest against Government tax proposals. Those people had come from around the country, not to represent the interests of the bingo companies, but to express the passion that communities have for their bingo clubs and their desire to protect them. I was delighted that many hon. Members attended the demonstration, including the hon. Member for Llanelli (Nia Griffith). Unfortunately she voted with the Government on 13 May, but I hope that now she has seen her bingo club players and the Plaid Cymru candidate at the demonstration, she will change her mind tonight. That would be very helpful, and it would be welcomed by the many women who made the six-hour journey to attend that demonstration last week. I am sure that they will pay great attention to how the hon. Lady and many of her colleagues vote tonight.
	The key point of principle in this debate was clearly laid out on 13 May. It concerns the unfairness of taxation levels on bingo in comparison with other forms of gambling. Online bingo, casinos and poker are taxed at 15 per cent. Online sports betting is taxed at 15 per cent., as is sports betting in a betting shop. The football pools and betting exchanges are also taxed at 15 per cent. Only casinos are taxed differently—on a sliding scale between 15 and 50 per cent., but I am reliably informed that if bingo clubs were taxed on the same basis as casinos, each and every one—without exception—would pay tax at 15 per cent. We need some fairness, and to avoid bingo being uniquely taxed at 22 per cent.

Peter Bone: The hon. Member makes an important point, but does he detect a trend in this Finance Bill? The Government seem to want to hit the poorest the hardest. We have seen no compensation for the doubling of the 10p rate. We have just seen the APD proposals that will affect the poorest, and now they will be hit hardest by these proposals.

Stewart Hosie: In an attempt to build an all-party consensus on my amendment, I might not follow the hon. Gentleman's logic in its entirety. It might be more accurate to suggest that, with a national debt approaching £1.6 trillion, complete chaos in the current account, and the Government's finances in turmoil, they are simply scrabbling about trying to fill the black hole from everyone's pockets in whatever sector they can find.

John Gummer: Might it be that the Government are being snobbish? Somehow they think that there is something infra dig about the bingo club, where they would not be seen going.

Stewart Hosie: I am almost at a loss; the temptation is too great. It is a good thing that the hon. Member for Crewe and Nantwich (Mr. Timpson) can comfortably go to the bingo with his wife. The hon. Member for Barnsley, Central (Mr. Illsley) can also go to his local club. More Labour Members should go to their bingo clubs, which are mainly in working class communities, and see that those who go there are normal people. The Government should not be afraid of the working class, and nor should they tax them so outrageously.

Jeremy Browne: I visited Mecca bingo in Taunton on Friday and met many people who, in the past, may have considered voting Labour, although I suspect that they will not do so in future. The hon. Gentleman mentioned revenue. I am told that Mecca bingo will pay some £10 million a year more as a result of being taxed at 22 per cent. rather than 15 per cent. To put that in context, £10 million is the additional borrowing that the Government run up every half an hour. The idea that the extra bingo taxes are likely to plug the hole in the public finances is fanciful. The reason must be something more serious or vindictive.

Stewart Hosie: I was not aware of those figures, but they are very interesting. The public finances are in such a perilous condition that the Government are scrabbling around to fill the hole with whatever they can possibly raise.
	Even if bingo clubs were taxed on the same basis as casinos, they would pay only 15 per cent. and that would be fair. However, if unamended, the Finance Bill will set in statute this profound unfairness, and that is what amendment 4 seeks to address.

Don Foster: The hon. Gentleman is right to reflect on the debate that we had on 13 May. During that time we all kept quoting the figure of 22 per cent., as he just has. Is it not the case that the actual rate that the bingo clubs will be paying is 27 per cent. because the Government failed to take account of the effective rate, which includes the unrecoverable VAT, worth a further 5 per cent.?

Stewart Hosie: That is absolutely right. I know that the hon. Gentleman went over that point in some detail during the last debate on this topic, and I would expect him to do so again.
	On the point of the unrecoverable VAT—or of VAT in general—and the most recent history of the Government's appalling behaviour in relation to bingo, there is one qualitative difference between the debate today and that on 13 May. It is highly relevant to what we are talking about today. HMRC, as I understand it, has announced its intention to appeal the recent High Court decision, which followed the May and August VAT and duties tribunal that upheld Rank Group's respective claims that the inconsistent application of VAT on interval bingo and gaming machines contravened the EU principle of fiscal neutrality. We do not yet have a date for the Court of Appeal hearing, but it is likely to be next year.
	That is vital, because the Government argue that the sector will benefit from the removal of VAT with an increase in gross profits tax to 22 per cent. The sector and I, however, will argue that that is false because the rulings that we have had so far would tend to indicate that the Government were never entitled to levy the tax or collect that revenue in the first place.
	I do not want to pre-judge the appeal, but as the Government have lost the first two rounds—the VAT and duties tribunal and the original High Court case—it appears to me that there is no certainty that the Court of Appeal will come to a different decision next time round. That means that we are voting on a point of principle about unfairness and, more important, on the impact of the rise of GPT from 15 per cent. to 22 per cent. on bingo clubs, communities, jobs and tax yield. I would argue, given what we have seen in the recent history of the bingo sector, that the implications of that tax have the potential, at least, to be pretty nasty in communities around the country.
	Let us gently remind ourselves that the sector provides good quality community facilities and safe environments, mainly for women, in mainly working-class communities. The bingo companies invest in the clubs in those communities. That entertainment and investment might well be lost if, as we have seen, more clubs over and above the 40 that have closed recently close in the next few years. The sector provides employment and, again, the jobs are mainly based in working-class communities. If those jobs are lost now, with unemployment rising, employment falling and vacancies coming down massively, those lost jobs might be lost for good. The Government's old argument was that people who lost their jobs in bingo clubs could find new jobs elsewhere, but that becomes less valid as each day passes, as unemployment rises and as the number of vacancies comes down. We have already lost 4,000 jobs.

Michael Weir: My hon. Friend is making a very powerful case. In Montrose, the local Gala club has closed down and it is very difficult for its former employees to find alternative jobs. The same sort of businesses in the town, which might have taken up that slack, are also suffering in the recession.

Stewart Hosie: That is absolutely right. The closure of the club in Montrose was a tragedy for the town and for the borough. The jobs have been lost and my hon. Friend is right that it is difficult for those people to find replacement jobs. In the current climate, it is also nigh-on impossible to identify any other business that would seek to reinvest in such community facilities given the rate of returns, not least when we take account of the cost of borrowing money to invest in new facilities to replace those that are being closed.

Hywel Williams: In my constituency, the club has received substantial investment recently. The companies have a good track record of investing their money in local communities, which need such facilities.

Stewart Hosie: That is absolutely right. We see the large clubs, the well-run clubs and the millions of pounds that are required to be and are invested and reinvested year after year, on a cycle, to refurbish them and bring them up to speed so that they continue to provide the good quality facilities that we all have in our constituencies. We do not want to see any of that investment lost.
	Of course, it is not about investment, jobs or community facilities. As the clubs close, business rates fall, income tax take goes down, national insurance yield goes down, benefit costs increase and, of course, community facilities close. For all those reasons, we need to ensure a level playing field and fair taxation and to remove this quite extraordinary burden on bingo—of all sectors—when compared with all other gaming sectors.

John Redwood: The hon. Gentleman is making some interesting comments. Does he have any forecasts of how many clubs might close, and of how much loss of revenue there could be in total?

Stewart Hosie: I do not have forecasts, but I suspect that the industry will be anxious that its pressure on the Government is successful so that we can avoid the eventualities to which the right hon. Gentleman refers. However, I am sure that the profitability of all clubs, and their investment profile over the next few years, is being looked at. In the recent past, 40 or so clubs have closed with 4,000 or so job losses, so we can see the sort of picture that might emerge if things remain very difficult.
	Amendment 4 would keep the duty at 15 per cent. but amendment 5, also in my name, would delay the implementation of the change until 2010. The advantage of that is that at least we would have the certainty of the outcome of the Appeal Court hearing.
	I shall listen to what other hon. Members say in the debate, but my instinct is to ask to press amendment 4 to the vote. Holding the rate at 15 per cent. is better in principle than simply seeking to delay the change, as that might give rise to a grey area. As I said, I shall listen to the debate, and especially to what the Minister says.
	I said at the beginning of my speech that I had reread the debate from 13 May, to which the hon. Member for Hammersmith and Fulham made an extremely important contribution. He said:
	"We have no wish to widen the gaping hole in the public finances. Instead, we wish to prevent the Government from pre-empting the legal process through this sudden change to their system—after all, it was the Government themselves who launched the appeal to the High Court."—[ Official Report, 13 May 2009; Vol. 492, c. 970.]
	He was absolutely right. He backed the amendment, as did many of his Front-Bench colleagues, including the hon. Members for Fareham (Mr. Hoban) and for South-West Hertfordshire (Mr. Gauke), as well as the Opposition Treasury Whip, the hon. Member for Rochford and Southend, East (James Duddridge) and many others. The Government have announced their intention to appeal the High Court decision, so today's debate on an identical amendment is framed in terms that are precisely the same as those that he used to define the debate on 13 May.

Greg Hands: I thank the hon. Gentleman for giving way. He is being quite accurate, but he is leaving out an important piece of information. He was not present for it but, in the interim between this debate and the debate of the Committee of the whole House, there has been a vote on clause 112 of the Finance Bill, which would remove VAT from bingo. That is relevant to today's debate.

Stewart Hosie: I understand the black-hole argument perfectly clearly, but it does not apply here. The tribunals and the first High Court decision told us that the Government were not entitled to that VAT in the first place, and the Appeal Court ruling may confirm that. If the argument is that some of the Red Book's revenue yield forecasts will have to be changed, I refer him to what many Opposition Members have said. They have described the Red Book as "difficult to believe", and I shall put it no more strongly than that.

Greg Hands: I thank the hon. Gentleman for giving way again. I think that he is referring to the assertions that I and various right hon. and hon. Friends have made about some of the growth forecasts and income projections for future years. It is very important that a proper distinction is made between what the Treasury will take in this year, and what it will get in future financial years.

Stewart Hosie: What I am trying to do is prevent members of the Conservative Front Bench from wriggling out of their responsibilities to the bingo sector—and, more importantly, to bingo club members up and down the country. It is vital that we keep the assets and the jobs, and all the income and duty yields from national insurance, income tax, corporation tax and business rates. For all those reasons, we reject the proposal to raise the rate to 22 per cent. We must keep it at 15 per cent. and, on a point of principle, deliver fairness across all forms of gaming. Bingo must not be left hung out to dry.

Eric Illsley: It is always a pleasure to follow the hon. Member for Dundee, East (Stewart Hosie). As he points out, we have rehearsed these arguments previously, but he is right to say that the argument is about the closure of amenities for our constituents, the threat to bingo clubs and the facilities that they provide throughout the country, and the consequent job losses when such clubs close.
	The hon. Gentleman referred to the history of the argument, beginning with double taxation. The bingo industry has long argued that it is the only form of gambling subject to double taxation, with VAT levied on participation fees and gross profits tax on the overall profits of the industry. The industry argued for some years that it should be given parity with bookmakers, casinos and the internet, where harder forms of gambling take place, with larger sums of money, yet those are not subject to double taxation. For example, when someone walks into a betting shop to place a bet on a horse race, there is no charge involved in placing that bet.
	When I was preparing for today's debate, it occurred to me that we could go back a few years to arguments about bingo and other forms of gambling when advertising for bingo was not allowed, although it was allowed for other, harder, more commercial forms of betting. We seem to be involved in a similar argument now. There appears to be a bias against the bingo industry. In Committee on 13 May we explored the arguments, which were ably outlined by the hon. Gentleman. As a consequence, the Government undertook to remove the burden of double taxation in the Bill by removing VAT on participation fees.
	Double taxation is not the only problem facing the industry. There are other issues, which have been outlined in the House previously—the general economic situation, the smoking ban and other issues, which the industry accepts and which we are not using in support of that industry. The present argument is about the level of gross profits tax and the ending of double taxation—the double-edged sword of increasing gross profits tax to 22 per cent., without giving the industry time to adapt to the removal of VAT on participation fees, to see where those funding streams were likely to settle. There is an argument over the figures, as the hon. Gentleman pointed out, and there is some argument about the amount of VAT raised.
	My own constituency has suffered a bingo club closure. As I mentioned in the last debate, the remaining bingo club in my constituency has a membership of more than 20,000. These are important facilities in our constituencies. They have a large membership and it is important that we keep them as an amenity. The loss of a bingo club is a huge loss to the community, particularly if it is the only bingo club in town and a large number of people have to find an alternative leisure facility or go to another town to join another bingo club if that one remains open.

Michael Weir: I strongly agree with the hon. Gentleman. I have experienced the same thing in my constituency, in Montrose. It strikes me that there is another aspect to the argument. Anyone watching certain TV channels will notice a huge growth in online bingo. I wonder whether it is healthy for people to sit and play bingo on a computer, rather than going to the more social setting of their local club.

Eric Illsley: The hon. Gentleman makes a valid point. I am not sure that it is healthy for anybody to sit in front of a computer terminal for any length of time, whatever they are doing. That relates to what I shall say shortly when I compare bingo with other forms of gambling. As opposed to someone sitting in front of a computer terminal at home with a credit card, playing bingo in relative secrecy, people play bingo at a club in an environment that is protected, regulated and managed. People are looked after by the management of the clubs, which by and large is good.
	The industry looks to the Government for support, in view of the closures, the double taxation and the losses. It welcomed the ending of double taxation, as I have said. There has been considerable support across the House for ending double taxation and for the bingo industry; 129 Members have signed an early-day motion in support of the bingo industry, such is the popularity of bingo and the concern felt by hon. Members across the House about the effect of closures on their constituency or locality.
	As the hon. Member for Dundee, East, mentioned, gross profits tax has increased from 15 to 22 per cent. That is a 46 per cent. increase in GPT. Even without going into the mathematics—even just looking at that increase—one can say that the fact that there was a 46 per cent. increase in GPT after VAT was removed tends to suggest that there was some compensating on the part of the Government. With that substantial increase, they are giving with one hand and taking back with the other.
	It is on the VAT and GPT figures that the industry and the Government have once again parted company. The Government maintained, and Ministers said in a previous debate, that the overall taxation on bingo had fallen from about 34 per cent. to about 26 or 27 per cent. I think that the hon. Member for Bath (Mr. Foster) said that it was 27 per cent., taking into account other factors. The Government's estimate in the Red Book is that they will lose £50 million of revenue in VAT losses, but will gain £35 million from GPT, leaving a net gain to the industry of £15 million. It is those figures that the industry disputes. It does not believe that those figures are accurate or sustainable. I understand that the Bingo Association has provided the Government with figures to try to show that there is a dispute about the Government's numbers.
	The same end result—an advantage of about £15 million to the industry—could be achieved with a much lower rate of GPT, because the VAT receipts are lower. I have in my hand figures provided to me by the Bingo Association that demonstrate that, but I do not profess to understand everything on that piece of paper. Having surveyed 592 bingo clubs across the country, the industry is saying that if we assume a VAT rate of 17.5, and not 15, per cent., and a GPT rate of 18, and not 15, per cent., main-stage bingo would raise something like £20.8 million in VAT. Interval bingo would raise £39.8 million in VAT. There would be irrecoverable VAT at £21.7 million. That would leave an overall VAT figure of £38.9 million, balanced by GPT figures of £23.3 million. That would leave a balance in favour of the industry of £15.6 million. Those are the figures put forward by the industry to contradict the Government's figures in the Red Book. As I shall say later, the industry would like further consideration of the VAT and GPT figures that it has provided, because it feels that it can achieve the figures in the Red Book without such a huge hike in GPT.

Nia Griffith: Has my hon. Friend had representations from constituents who have looked at the figures for their local club, and who, in some of the smaller clubs in particular, find that the change in VAT is not bringing them the benefits that they were told it might? Is he concerned that some of the smallest clubs will therefore have the hardest time?

Eric Illsley: I am grateful to my hon. Friend for that intervention. I had not had that information, but she has made the point eloquently. I agree with her that it will be the smaller clubs that feel the pinch. Obviously, the bigger companies are more able to stave off losses, but at the end of the day the effect will be felt by the whole of the bingo industry.

Peter Bone: The owners of my local bingo club in Rushden, Flutters, made a very powerful point: the club needs renovating, but they will not renovate now, because they cannot claim back the VAT as they previously could have done.

Eric Illsley: The hon. Gentleman makes an interesting point, and I am sure that the situation throughout the industry will lead to similar instances elsewhere.
	Even though the Government have halted VAT on participation fees, the industry still warns of further closures, and they are continuing. That suggests that the industry is still adversely affected by the changes to the taxation regime: it still hurts the industry to the point that more clubs are closing down. That suggests in turn that the industry's figures might be right and the Government's optimistic, because it is generally agreed that the Red Book VAT receipts figure of £50 million is something of an estimate. It is not that well defined. Perhaps the Government could look at the figure again, with the industry, to see whether there is a way forward.
	The industry maintains that it is more heavily taxed than other forms of gambling, as the hon. Member for Dundee, East said. His amendment seeks to retain GPT at 15 per cent. to maintain that parity, and he made a strong argument for it. Again, he mentioned casino GPT, which is on a sliding scale. If that were applied to bingo clubs, it would give all bingo clubs an effective rate of 15 per cent., because of the banding that applies to the casinos.
	The hon. Gentleman went through the reasons why we should support bingo, and I shall quickly touch on them to reinforce them, yet again, on behalf of our constituents. It is a softer form of gambling than others, such as internet gambling, casinos and so on, and it is attractive predominantly to women. Many women enjoy going to bingo clubs in groups, and sometimes with their husbands or whoever. They feel safe, it is a protected environment, they are looked after, and they cannot gamble too much of their money away. Daytime bingo sessions are sometimes the only entertainment that elderly members of our communities get in the week, and people very much look forward to going out with friends to enjoy bingo in the afternoons and so on. Those are often social occasions, and bingo clubs are a social amenity, but once they are gone there is little alternative other than, as the right hon. Member for Suffolk, Coastal (Mr. Gummer) said, online bingo in front of a computer screen, daytime TV or whatever.
	Let us compare bingo with forms of gambling that are unregulated and not subject to the same regime, such as internet gambling, poker and in-play betting. I am not opposed to in-play betting, but we see adverts in the middle of a football match and we can imagine them playing in a public house, where at half time someone comes on saying, "Bet in play. You can bet on the next corner, goal or booking". If drink is involved and lads are watching a football match, a lot of money could be spent over the telephone betting, yet we are not doing anything about that form of gambling. We are, however, coming down pretty hard on bingo, and allowing closures to take place that affect a very soft form of gambling.
	I now turn to the amendments. Obviously, I support and have added my name to amendment 4, tabled by the hon. Member for Dundee, East, which would return bingo to parity with other forms of gambling and retain the 15 per cent. rate. I think that it was the hon. Member for Wellingborough (Mr. Bone) who referred to casinos, and the amount of money gambled in casinos is vast. We read in the newspapers stories of people losing tens of thousands of pounds in an evening in a casino, yet that will be taxed at 15 per cent. Bingo is a relatively modest form of gambling, yet that taxation is going up to 22 per cent. Where is the logic? The rate of tax on a form of gambling for the rich and privileged is lower than that on a very soft form of gambling for predominantly working-class people. I cannot see the logic of that. If we are to tax any gambling at 22 per cent., it should be the harder forms, including the gambling done at casinos.
	Amendment 22 would make bingo duty chargeable at 16 per cent. rather than 22 per cent., while amendment 23 would make bingo duty chargeable at 17 per cent. I should have tabled a further amendment to make it chargeable at 18 per cent., because the figures provided by the bingo industry are based on a GPT figure of 18 per cent. The industry says that, on the basis of its figures, an increase in bingo duty to 18 per cent. would provide the same amount of money as that suggested in the Red Book. Furthermore, it could live with that; it would find that acceptable.
	The amendments were tabled on the basis of figures provided by the industry, which maintains that those figures are more accurate and relevant to where we are at the moment. Through my amendments, I am inviting the Government to reconsider the figures, perhaps with the industry. They should consider a rate of 18 per cent., 17.5 per cent. or whatever. They should also look at the VAT figures suggested by the industry and the VAT returns, and get a more accurate prediction of how the bingo industry will be affected by the changes. The Government should try to determine a rate acceptable to the industry, to Members of the House and to our constituents. That would probably mean an end to the closures.
	Amendment 24, also in my name, is similar to amendment 5, tabled by the hon. Member for Dundee, East. It would delay the implementation of the changes. I shall not add to the hon. Gentleman's comments about the court case, but there seems to be a sensible reason to delay the implementation of the measures and either return to parity or renegotiate with the industry until the court case has been decided. There is room for negotiation with the industry, to find out the true figures for the irrecoverable VAT and the returns from GPT. I hope that the Government will consider the amendments and the bingo industry figures, which I feel they have in their possession. I hope that they will think again.

John Gummer: I should start by saying that I am not a supporter of gambling; I do not like it or approve of it and I find it a pretty boring and unattractive way of spending money or time. However, I should not be imposing my views on the rest of the population. Clearly, large numbers of people get great pleasure from forms of gambling that do minimum harm, and I would have thought that bingo was one of them.
	If I were trying to raise money to plug the enormous gap that the Government have created in the national finances, I would be considering the forms of gambling that manifestly do cause significant harm. In casinos, for example, people with more money than sense waste it in a way that is probably socially undesirable. Would it not be much better to increase the tax on casinos and decrease the tax on bingo? That seems an extremely logical argument—so logical that it is difficult to understand why the Government have not accepted it already. However, I have to say that the Government seem to be the most illogical I have ever had to deal with; they seem unable to see simple things in a simple manner.
	In my constituency, bingo is concentrated in Felixstowe, a celebrated holiday town. It has a large number of older people, and bingo is an important part of the service that it provides for its residents and for people who come into the town. I want it to go on doing that. It employs people and provides others with something that they obviously enjoy and choose to enjoy. Why on earth should they pay more for that enjoyment than people who go off to Aspinalls and other such gathering places and watering holes? There is an innate snobbishness in this Government. They do not want to have a go at the people who go to the smart places along Curzon street and the rest—they do not want to fall out with them, oh no!

Jeremy Browne: Is the right hon. Gentleman suggesting that Lord Mandelson and other key figures in the Government do not enjoy going to bingo clubs in their spare time?

John Gummer: I can imagine the noble Lord in many circumstances, but I had not thought of the bingo club as one of his habitual areas of interest. However, I do not want to make a personal comment about Lord Mandelson, although of course the opportunities are enormous.
	There is a continuing theme of insensitivity throughout the whole Finance Bill. The Government seem to have no understanding of how what they are proposing will affect ordinary people. I cannot understand that. The Minister is somebody we all admire; we find her interventions most interesting and she is always most courteous in giving way. I cannot believe that she really wants to subsidise the people who can afford to go to casinos by charging more to the people who go to bingo clubs, and yet she has been defending a change in the taxation system that means that the poorest people are subsiding those who are richer. That does not seem very sensible, but she has defended it. No doubt—I fear this is inevitable—she will get up to explain why it is basic to Labour doctrine that the poor shall subsidise the rich. I find that pretty obnoxious.
	Yesterday there was a very impressive speech—I am sure that you heard it, Mr. Deputy Speaker—by the right hon. Member for Birkenhead (Mr. Field). The only thing that I disagreed with him about was his belief that only Labour Members have the poor at heart. I hope that a much larger constituency in this House believes that the reason we are here is to defend those who are least able to defend themselves, not only in terms of their liberties but their ability to exist comfortably in society, to earn a decent living, and to maintain their families in decency. That is why I came into this House. I do not like bullies of any kind; I want to stand up for the bullied rather than the bullies. This Government are constantly standing up for the people who can stand up for themselves, and not standing up for those who cannot. That is why I stand up for a lot of people whose enthusiasm I do not share, in the belief that they should be able to have it and be protected by this House in doing so. We should not only try to ensure that they pay the same level of duty as on other forms of betting but suggest that it might even be a comparatively lower one.
	These people have already been hit very hard. I do not think the Government have ever really come to terms with some of the by-blows of their decision on smoking in public places. As an enthusiast for the environment, I am fed up with the fact that we have increased emissions in this country caused by outdoor heating that enables people to smoke outside pubs because nobody was prepared to take the sensible view that a room where no one was serving could be put aside for those who wanted to smoke. No, that could not be done—that was against the theology of the policy—so now we warm the heavens in order that people can smoke outside.
	We must also face the fact that the smoking ban has had a direct effect on bingo clubs. I rather like a former Home Secretary who got into terrible trouble for suggesting that the ban would affect his poorest constituents most. I am not arguing that case again; I am merely saying that it has had a real effect on areas where people with limited means, and often with homes that are less comfortable than those of the Exchequer Secretary and her ministerial colleagues, gather together somewhere warm, pleasant and light where they can enjoy themselves. Now they cannot smoke, which may be good for them, but if we are also going to tax them heavily on their bingo because that might be good for them, that is an aspect of the nanny state that I could well do without.
	It seems to me that if my constituents want to play bingo, they should be able to do so at a cost that is as low as we can provide for. The taxation should therefore at least be fair, which argues for a lower rate than forms of gambling that only people with greater resources can indulge in.
	The Government are doing a most peculiar thing in first lauding themselves for doing something about double taxation and then proceeding to ensure that they make up for it by having bigger single taxation. That does not seem to me a wildly clever argument, because it does not convince anybody. Nobody thinks that the Government are actually being helpful; people just think that they are clearing up an embarrassing anomaly and deciding that they will get the money back in any case.
	How much more sensible it would be if the Government came to the House and said, "We're going to tax the rich more than we do the poor. We're going to put up the tax on casinos sufficiently to make up for the taxation reduction that we're going to make on bingo halls." That is the sort of thing that I would expect from a Labour Government, but we now have to look to the Conservatives for every kind of social support for which we used to look to the Labour Benches. That is true right across the board. On every criminal justice Bill, I have time and again voted to the left of the Labour party. When we came to discuss the Iraq war, I voted against it because I thought it was wrong, and the Labour party voted for it. Now I have to vote for the poor on bingo, because the Labour party wants to tax them more.
	What is really happening is that we are seeing the social revolution that will end on 8 May or whenever it is, when a Conservative Government committed to the poor replace a Labour Government committed to the rich. The public will welcome that with open arms.

Adrian Bailey: May I just ask the right hon. Gentleman what his position is on his party's inheritance tax proposals?

John Gummer: I might ask the hon. Gentleman what his position on his party's proposals—

Mr. Deputy Speaker: Order. Fascinating as those views might be, they have no place in the debate on this particular amendment.

John Gummer: I am sure that I can be guided by you on that matter, Mr. Deputy Speaker. I wish I could not be.
	We are now facing a Government in disarray. This is another small example of a Government who have lost the plot on every issue, of their just not thinking things through, not recognising what they are doing and not listening. It is not just the Prime Minister who does not listen; nobody else does either. There is a commonality of deafness that is much more serious than swine flu. It is a really serious problem, so I ask the Exchequer Secretary, who is a sensible Minister, to listen to us on this. She must recognise that it does not do the Government any good constantly to push forward with measures that disadvantage the already disadvantaged and advantage those who have already got enough.
	It is time we recognised that there are serious gambling issues to consider. Online gambling is particularly serious: people do it in their own homes, in entirely uncontrolled circumstances, with no peer pressure or concern and no one to see. That is where the danger comes, and I would much prefer the Government to attack that through taxation than bingo, which is largely a happy, cheerful activity indulged in by happy, cheerful people who used to vote Labour.

Dari Taylor: I ask the Government to think again. The argument has been well presented three times in the Chamber that bingo is a pleasurable activity for many people, often the elderly and those on low incomes. It is clear that we all want the Government to reconsider.
	I support the amendments that my hon. Friend the Member for Barnsley, Central (Mr. Illsley) has tabled, and if the Government give us no room for manoeuvre, I will vote for the amendments and against the Government. I do not do that easily, but I will do it.
	It is important to understand that although Mecca thoroughly celebrated the removal of VAT, unrecoverable VAT has become a factor. The industry needs time to work out whether the funding stream is adequate and can ensure the quality and delivery of bingo halls—we do not know that yet. We know that the industry says that it can achieve the Red Book estimates and it wants time to do that. I therefore say to my hon. Friend the Exchequer Secretary, who has been a friend for many years, that the Government must show us that they will think again.
	I think that we would all like gaming and gambling to be treated equally, but they are not. If the measure goes ahead, there will be bingo online. The right hon. Member for Suffolk, Coastal (Mr. Gummer) could not have introduced that issue better or more colourfully. Casino online and poker online, sports betting in betting shops, betting exchanges and football pools will all end up with 15 per cent. tax, though that does not apply to casinos. Yet bingo will face tax of 22 per cent. That is not fair.
	Not only the money aspect but the other side of the coin concerns me. We speak passionately in the House about the leisure facilities that we would like afforded to our young people. We focus on that appropriately. However, there are not many discussions in the House about the leisure facilities that we should support for our elderly. Indeed, I do not think that I have ever heard a discussion in the House about that. We have talked about free bus travel, which is excellent, but we are considering a leisure activity. I am talking about 400 to 500 people who twice a week go to a pleasing environment, where they meet up—it is very sociable—eat a good meal for a reasonable price and thoroughly enjoy the afternoon or evening. They hope that they will win, although they often do not, but that is part of the game.
	We should appreciate that those 400 to 500 people, who are on low incomes and retired, are spending time in pleasing surroundings, having inexpensive fun in a controlled environment. Again, the right hon. Member for Suffolk, Coastal made it clear that the environment is controlled, not only because people watch how much each other spends or perhaps drinks, but because if one person does not show up, a network starts up, with people asking, "What's happened to old Fred?" and there is serious concern. For me, therefore, bingo is a critical bit of kit.
	I was once asked to call the numbers. I stress once; I was not exactly good at it, so I was not asked to do it again. The elderly thought that I was a deplorable caller; the management thought that training might possibly have helped. However, for me, it was important to see what was happening and to be part of it.
	People have spoken about the employment opportunities. A critical aspect of those opportunities is that 70 per cent. of those employed in bingo are women. Bingo is an easy piece of the employment world for women to fit in with their families or their age, perhaps because their levels of activity are much more controllable in that environment than they would be in many others. We are talking about a particular group of women. They do not earn a fortune, but they earn enough to make life bearable. However, it is not just that those employed in bingo are women. Oftentimes, Mecca Bingo—and, I am sure, other organisations—give training. Youngsters get national vocational qualification opportunities.
	All round, bingo is a good leisure activity which we should support. I therefore ask those on my Front Bench—I am asking them very carefully—please to think again. None of us will object to their thinking again; indeed, the whole House will appreciate it. Bingo is a small part of leisure activities overall and it will produce a small amount of money for the Treasury. However, that amount will be smaller if there are further club closures on top of the 90 clubs that have closed so far. Surely spending that small amount is worth while given that so many people enjoy so much from the activity.

Greg Hands: Remarkably, clause 20, on the taxation of bingo, has attracted more amendments than any other clause in this year's Finance Bill, which reflects the Government's botched approach to such an important sector.
	I spoke for more than an hour on clauses 20 and 112, and I hope to speak for a rather shorter time today. However, let me make the Opposition's position clear from the outset. We cannot see any reasonable or logical justification for bingo to be taxed at 22 per cent. while the remainder of the gaming industry is generally taxed at 15 per cent. We would like the anomaly to be rectified as soon as time and the public finances allow it. However, rather like the hon. Member for Barnsley, Central (Mr. Illsley), we have found it incredibly difficult to get any sense out of the Treasury about its figures on either bingo or the ongoing court case, the consideration of which formed the centrepiece of our amendment in the Committee of the whole House, which took place two months and two Exchequer Secretaries ago.

Mark Field: Although I do not necessarily share the anger about casinos expressed by my right hon. Friend the Member for Suffolk, Coastal (Mr. Gummer), not least because many are in my constituency, I am fairly positive about a lot of the online offerings. What is most perverse, however, is that online bingo is charged at 15 per cent., yet bingo in a club, which has so many desirable social outcomes, for all the reasons so adequately pointed out by the hon. Member for Stockton, South (Ms Taylor), is charged at 22 per cent. That is a quite ludicrous state of affairs.

Greg Hands: I thank my hon. Friend for that intervention. We touched on that issue in the debate on clause 114, which covers the duty on online gaming. As was pointed out, there is now an incredible anomaly, in that playing online bingo will now attract far less tax. Surely we should all recognise the social benefits of bingo clubs for their clientele. It is therefore an incredible anomaly that we should be taxing the online version significantly less than the club version.
	The Bill's consideration in Committee of the whole House was, as I said, some two months and two Exchequer Secretaries ago, and we have seen some amazing figures since then. During the debate on clause 20 in May, I questioned the Government's figures for the cost of removing VAT from participation fees—in other words, the theoretical cost of the linked clause 112, which we have already debated. I was referring to the cost assuming that VAT was being paid in all areas.
	We have now obtained more information on how the Government arrived at their figure of £50 million, through the answers to some written questions. On 18 May, the Financial Secretary to the Treasury replied that the cost of removing VAT on main-stage bingo—the standard form of the game—was some £20 million. In one of her few acts during her short-lived nine-day reign in the Treasury, the hon. Member for Burnley (Kitty Ussher), the current Minister's immediate predecessor, added on 10 June that the cost of removing VAT on interval bingo—the newer form that the High Court ruled on in the VAT tribunal case—was some £25 million. That adds up to a total of £45 million. As I said in the Public Bill Committee, I therefore assumed that the remaining £5 million of the £50 million related to participation fees on equal chance games other than bingo—principally poker.
	That is the estimate relating to the £50 million in the Red Book, as I see it. In any case, the estimates for 2009-10 back up the argument that I made in the debates on clauses 20 and 112 that the industry will, in practice, pay more as a result of all the measures in the Finance Bill. We are not aware of any major operator paying VAT on interval bingo and, after the court ruling, it is hard to believe that any operator would even contemplate doing so. As I have said, a number were also withholding VAT receipts on main-stage bingo, and that number is now likely to swell. It is reasonable to conclude, therefore, that actual receipts would have been below £20 million for 2009-10, before the court ruling, and that they could now be zero.
	However, the Red Book shows that the increase in bingo duty is expected to raise £35 million. Far from reducing the effective tax rate, as the Minister's pre-predecessor insisted, the Government's proposals appear to constitute a tax hike of at least £15 million. This matter cropped up yet again in the Budget debate, and the Financial Secretary was wide of the mark when he said:
	"Overall, the announcements in the Budget on the taxation of bingo are welcome to the industry."—[ Official Report, 23 April 2009; Vol. 491, c. 434.]
	I found that absolutely extraordinary, but the point is that no one really knows for sure, because the Government refuse to be definitive.
	The current Exchequer Secretary, who is with us today, told us during the last sitting of the Public Bill Committee on 25 June:
	"The £50 million is made up of the cost of recovering VAT on mainstage bingo, interval bingo and card rooms. The roundings are to the nearest £5 million, so although £20 million, £25 million and £5 million are not exact figures, they show the proportions."—
	That is an extraordinary lesson in mathematics: figures of £5 million, £20 million and £25 million can all be subject to a rounding error of £5 million. Yet that is what the Red Book calculations are based on. It is absolutely amazing.

Stewart Hosie: Can the hon. Gentleman think of any other Government assessment where it is possible to be out on three figures by 100 per cent., 25 per cent. and 20 per cent. on the basis of rounding?

Greg Hands: The hon. Gentleman's intervention speaks for itself; he makes his point extremely well.
	The Government are being evasive, to say the least, on the figures, and I am afraid that the Exchequer Secretary's letter to the Committee on 1 July did nothing to clear the matter up. I would be grateful at last to receive an explanation of where the figures come from. In the letter, the Minister reiterated that the estimates for VAT revenue in the Red Book were rounded to the nearest £5 million. Unfortunately, that leaves some confusion about whether the figures revealed in written answers subsequent to the publication of the Red Book, but before the debate in the Public Bill Committee, were rounded to the nearest £5 million. I think that the implication is that they were. The Minister said:
	"I do not know the exact details of everything". ——[ Official Report, Finance Public Bill Committee, 25 June 2009; c. 618.]
	That was certainly the impression that she gave, and her letter has served only to confuse the situation still further.
	The industry has raised yet another concern about the Treasury's methodology. We heard in previous debates that the Government's revenue figures are based on their interpretation of the law, and not on the actual sums that they have been receiving. However, bingo operators are now suggesting—this was the point raised by the hon. Member for Barnsley, Central—that the Government failed to account for irrevocable VAT when producing the estimates. One industry estimate—we have probably seen the same estimate—put the total incremental irrevocable VAT at £21.7 million a year, assuming that it returns to a level of 17.5 per cent. next January. It is possible for the Exchequer Secretary to be precise—we have seen it, and she wants to be precise. Therefore, I invite her to answer right now whether the Treasury accounted for the irrevocable VAT and, if it did, what was the figure—preferably not rounded to the nearest £5 million—that applied in that case?
	The Government are extremely unwilling to provide meaningful figures on the costs of changes in gaming duty and VAT on bingo, yet they have asked us to consider the totality of measures in clauses 20 and 112. That makes it difficult, if not impossible, for us to judge the fiscal effects of any of the five amendments before us.
	Meanwhile, we have only just this week learned that the court action that Conservative Members, and the hon. Member for Dundee, East (Stewart Hosie), referred to in our deliberations on clause 20 and 112 is still ongoing. The Minister was thus wrong to tell us that the Government had until 30 June to make a decision on the appeal. That was wrong: she had longer and she used the longer period to make the decision. As it turned out, the Government had until this week and they have now appealed, despite the Minister's assertion about the expiry date. We understand that the case will now go to the Court of Appeal. We tabled an amendment in the Committee of the whole House to the effect that no changes should be made until the court case was resolved. The fact that the proceedings are ongoing is important information for our deliberations today.
	Given the level of uncertainty on both the legal and the revenue fronts, it is very difficult to assess the likely impact of any of the five amendments. Furthermore, we have already voted through the ending of VAT on bingo in clause 112, so we need to be careful to maintain a balance in the tax consideration of bingo while being mindful of the appalling position of the public finances that the Government have brought on us all. The Government are holding their cards close to their chest on the amount of revenue, but if they were to support one or more of the amendments and show us that they could be afforded in terms of the Red Book, we would look favourably on that.
	Let me clarify the Conservative position. The Government seem to think that bingo duty should by its very nature be higher than other gaming duties, but we do not see it that way. We view the 22 per cent. bingo duty as an anomaly. We thus await the Government's moves with eager anticipation. We would welcome moves that were properly costed, affordable and transparent, to bring bingo duty back into line with other gambling duties.

John Gummer: Will my hon. Friend help me on one point? It seems to me that we have to defend the revenue, which is perfectly understandable. The Government woollied their way through yesterday, defending the revenue in one way or another and threatening us with all the awful things that might happen. In case voting for the substantive amendment sends out the wrong signal to those who think that they can get away either with anything or with unfairness, would it not be sensible to vote for the amendment proposing to put these matters off to a later day, on which we could all agree, thereby supporting the revenue and forcing the Government to be sensible?

Greg Hands: I thank my right hon. Friend for that intervention. The correct course of action would have been for the House to vote in the Committee of the whole House for our amendment, which sought to postpone changes to the taxation of bingo until such time as both the court case and the financial implications had been resolved. Given, however, that we have voted through clause 112, which removes VAT on bingo and is the right thing to do, I cannot agree with my right hon. Friend's position—unless the Government can show that one of the amendments before us can be afforded without leaving a hole in the Red Book.

Jeremy Browne: This has been an interesting debate. The right hon. Member for Suffolk, Coastal (Mr. Gummer) told us that we had entered a new era in politics, in which the Conservatives were the champions of the poor and downtrodden and the Labour party had abandoned those people. It now transpires that when it comes to deciding whether they are in favour of people who are poor and downtrodden, the Conservatives are minded to abstain. Perhaps that is a metaphor for the wider positioning of their party.
	Let me turn to the matter in hand, which is bingo. I have visited Mecca Bingo in Taunton on a number of occasions, and I was there again last Friday, speaking to staff and customers about their pastime and about the effect that the Government's taxation of bingo would have on them as individuals. I was struck yet again by just how popular this form of activity is in my constituency, and indeed in many towns and cities across the country. Typically, 1,900 people visit Mecca Bingo in Taunton every week, and on Sunday evening, which is the most popular time of the week, the club will have about 400 customers.
	I think it fair to say, and indeed we have all observed for ourselves, that this form of gambling is particularly attractive to women—a point made by the hon. Member for Barnsley, Central (Mr. Illsley)—that it attracts older people, generally although not exclusively, and that it is more attractive to those with lower incomes than, say, visiting a casino. That is inevitably a generalisation, because we are talking about hundreds of thousands of people throughout the country who enjoy bingo, but I think it can be said that bingo is a form of gambling that is more likely to be undertaken by women, older people, and people in lower income groups. It is extraordinary that they should be targeted for a higher rate of tax than those who engage in other forms of gambling.

Alan Reid: My hon. Friend is right. Bingo takes place in a controlled environment, and the losses that people can make are very small compared to the almost limitless losses that can be made by those who go to casinos or engage in activities such as online poker or even online bingo. It is nonsensical to tax it at a higher rate than those other activities.

Jeremy Browne: I entirely agree. I think it is safe to say that online bingo, for example, is more likely to be undertaken by younger and more affluent people than those who visit bingo clubs. It does seem extraordinary that that form of bingo should be taxed at 15 per cent. while people going to clubs will be taxed at 22 per cent.

Greg Hands: Is not online bingo also likely to be much more addictive than the bingo hall version?

Jeremy Browne: I understand that it is. Moreover, there are no controls in the case of online bingo. Although it may be in the immediate financial interests of a bingo hall to allow a particular customer to gamble beyond his or her means, I suspect that in the vast majority of cases the owners demonstrate a degree of paternalism. They have a fair sense of how much money the regular visitors have and of what it is safe and reasonable for them to spend.
	Of course, many people do not go to bingo halls just to gamble. The gambling is often almost a secondary or peripheral attraction. Many people's main reason for visiting the hall is social: they want to meet friends, and catch up on news and developments. When I visited Mecca Bingo on Friday, it was stressed to me that there were many associated attractions, such as the provision of meals and other forms of entertainment. It seems that people regard going to bingo halls as being only partly about gambling.
	For all those reasons, it was pointed out for some years that bingo had suffered unfairly from what was described as double taxation, and that the anomaly ought to be addressed. The Government have now done that, but, as the right hon. Member for Suffolk, Coastal rightly observed, in effect they said, "Here you are; we are giving to you with one hand," but just as everyone was celebrating that great victory, the Government took away the benefits with the other. The overall effect on the bingo industry and the people who enjoy playing bingo is that the current situation is no better than it was before.
	When I visited Mecca Bingo in Taunton last Friday, it supplied the following statistics to me: across the United Kingdom last year 31 Mecca and other bingo clubs had closed and two had opened, which meant that there had been a net reduction of 29 bingo clubs. Some associated social factors may be at play in such closures, such as generational changes and a greater desire among people to spend more of their leisure time at home. The right hon. Member for Suffolk, Coastal speculated that the smoking ban may also have had an impact in some cases. It is, however, very hard to argue against the notion that the higher tax rate on bingo is making the situation worse, and making it harder for bingo clubs to be profitable.

David Heath: Is that not what makes the Government's decision to tax bingo more than other forms of gambling so odd? If their purpose is the suppression of vice, bingo is an odd target, as I am not aware of there being any particular links with organised crime, whereas if the purpose is to increase revenue, it is likely to have the opposite effect because of the consequent reduction in the size of the industry.

Jeremy Browne: Absolutely, and I should like to refer to the very subject of revenue. During yesterday's debate, we talked about beer duty. The problem in that regard is that because more and more pubs are going out of business on account of beer duty going up, the base from which the Government are collecting revenue is therefore falling. That is the case with bingo as well. If there is only one bingo club in a town—a seaside resort, let us say—and it is no longer profitable and therefore closes, the customers do not have an alternative place to take their custom. Many of them are unlikely to gamble online, and even if they did so, they would be taxed at a lower rate. The Government therefore forgo revenue as a result of that club closing.

John Gummer: Has not the hon. Member for Somerton and Frome (Mr. Heath) given the clue to this? He says that the purpose may be the suppression of vice. He will, no doubt, remember that in the 19th century there was a Society for the Suppression of Vice and people added to its title, "For those with an income of less than £5,000 a year," because it was not interested in that cause otherwise. This Government have, therefore, carried on a noble 19th century tradition.

Jeremy Browne: Let me return to that theme in my concluding remarks, because that is an interesting observation.
	As I have said, not only will the Government lose revenue when clubs close, but we should remember just how small the sums involved are. It has rightly been said that the total sums of money gambled on bingo are not great, so in the grand scheme of things the percentage tax take is not very significant. I am told that Mecca Bingo generates profits of only about £150 million a year. Therefore, the additional tax in respect of the differential between the rate that the Government have set and the figure that would be generated were bingo taxed in line with other forms of gambling is only a matter of a few million pounds a year. When one sets that against the backdrop of a public sector deficit this year of £175,000 million, it seems hard to argue that if the motivation behind this tax proposal is to plug the public finances, the Government will get very far using that particular plug.
	Let us also consider the wider social costs. Although it is hard to measure those in absolute terms, I have observed—as, I am sure, have other Members—that many people who visit bingo clubs do not have many other social opportunities.The clubs provide those people with all kinds of support that they might not otherwise receive, and it might cost to provide such support in another form.
	Most people would regard bingo as the safest and most benign form of gambling, and it is extraordinary that the Government should have got themselves on this hook. The point made by the right hon. Member for Suffolk, Coastal is surely the relevant political one for the Exchequer Secretary to consider. She must think about the sheer staggering ineptitude involved in a Chancellor, and a Department and its officials, not seeing this massive problem coming down the track. I do not blame her, because she was not at the Treasury at the time, but when she arrived and was given this brief she must have thought, "How on earth did the Labour party manage to get itself in a position where it is taxing bingo at a higher rate than other forms of gambling just before a general election?" If I were in her shoes, I would be appalled that I had been given such an impossible hand to play as a Minister and I would wonder whether my Government had completely lost their survival instinct.
	If there is one theme running through this Finance Bill, it is that the Government seem to have had an unerring ability to identify groups in society that might be inclined to support the Labour party and to punish them with higher tax. It is no wonder that very few people now vote for the Labour party in elections, because it seems to be systematically trying to pick those people off and give them reasons to vote for other parties. Unless the Minister is able to respond to the concerns raised by her Labour colleagues and by Opposition Members, it will be no surprise if bingo players across the country draw the obvious conclusion, which is that the Labour party is no longer interested in having their support.

Peter Bone: It is a great pleasure to follow the hon. Member for Taunton (Mr. Browne). As he made many of the points that I wished to make, I shall not repeat them. This is one of those occasions when, if every hon. Member had been here listening to the debate, rather than some of them hiding in their rooms, they would have supported the amendments proposed by those on both sides of the House. I have been sitting here waiting to speak for a while, and one of the pleasures has been imagining the hon. Member for Stockton, South (Ms Taylor), who made such a thoughtful speech, calling "Legs 11" and "Two fat ladies". I really do not think that she could have been bad at that—but I digress.
	My right hon. Friend the Member for Suffolk, Coastal (Mr. Gummer) made a powerful speech, and I agree entirely with him that the reason why we came into this House was to support the people in our society who are not well off, and who are vulnerable. Members on both sides of the House do that, but I have always believed that the Tory party has stood up for those people. I will be able to show again that we stand up for those people by supporting the amendments tonight.
	I wish to discuss the Flutters bingo club in the centre of Rushden, the second biggest town in my constituency. Everyone who turns down the high street to go to the post office or Barclays bank has to go past Flutters—the building is an old cinema—and people who pass by will always be struck by the happiness of the people going in and out of the club. It is a social club as much as a gambling one, and we certainly do not wish to lose such a facility in my constituency. Unemployment in Wellingborough has risen by 84 per cent. since Labour came to power, and I do not want any more people to lose their jobs.
	The arguments that I wish to put forward tonight have been submitted to me by the director and the owner of the Flutters club. The club is not a big concern; it is not part of Mecca bingo or some such organisation. This family have been in the business since 1982 and I believe that they run three small bingo clubs, of which the biggest is the Flutters club in Rushden. I am very much looking forward to going to it at 2.15 pm on Friday. Now I am worried that I shall be asked to call "Legs 11" and "Two fat ladies"; we shall see.
	The club's regulars are there to socialise, and not really to gamble. The owners see them as part of the family. The club has already been hit by decisions that Parliament has made. The smoking ban, introduced in July 2007, damaged business, but it was supported by the owners of the club. They do not smoke, and they thought that the ban was right for the health of customers and staff. It has also been hit by online bingo. The owners hoped that the Government would not make their life more difficult, but, they say:
	"new licensing laws, bureaucracy, and the punitive tax system kept piling on difficulties."
	The owners point out that just as they saw the light at the end of the tunnel, with the Government seeming to recognise that double taxation was wrong and bingo clubs should be treated in the same way as other gambling establishments, along came the proposal to increase the gross profits tax. Hon. Members may think that the GPT is a tax on the profits of a club, but it is not; it is a tax on turnover. Whether a club makes any profit or not, it still has to pay tax on the gross.
	It may appear that removing the VAT liability is a benefit for the club, but it will no longer be able to claim back input VAT. The Flutters club is falling a little into disrepair. The owners would like to refurbish, but they have had to put their plans off, because they will no longer be able to claim back the VAT. As their letter says, the owners would have been better off if VAT had been kept, at 17.5 per cent., and the GPT done away with.
	As the owners say, the increase in GPT beggars belief. Although they want to continue the club, the danger is that they will have to close if things continue to get worse. Some 20 people would lose their jobs.

Bob Spink: The hon. Gentleman is making a passionate and well-informed speech and I agree with everything he says. If the Conservatives ever win power and form the Government, will they cut the tax back down to 15 per cent.?

Peter Bone: I do not speak from the Front Bench—and probably never will—and my hon. Friend the Member for Hammersmith and Fulham (Mr. Hands) spoke with great clarity on this subject. I just want to talk about the situation of that small family club in Rushden. The owner makes the point:
	"Bingo is a working class pastime. It has amazed me that after 30 years it is a labour government that has brought us to the brink of closure."
	He wants to keep the club open because, if it closes, he
	"can see all those lovely warm grandmothers, everyone's 'Nan', sitting in a lonely room, waiting to be picked up to go to her bingo night out which she loves. But it's gone. So where can she go now for a night out, with a friend, or on her own because the staff and people are so friendly. Where?"
	It is that social element that I do not think that the Government have addressed at all. They must think again.
	The owner goes on to say:
	"We are not 'casinos' we are not 'bookies', we are totally different, we rely on lots of people so we need big venues, and the spending is small amounts, yet we are taxed 'more heavily'?
	I understand the increase in GPT can still be blocked and plead with you to do so, because, in short, it's insane."
	Tonight I will do everything I can to block it.

Don Foster: In many ways, this is an excellent continuation of the debate that we had on 13 May. Indeed, we have heard some of the old favourites—the excellent introduction by the hon. Member for Dundee, East (Stewart Hosie) and the passionate speech by the hon. Member for Barnsley, Central (Mr. Illsley). There has also been some welcome new blood in the debate—not least the right hon. Member for Suffolk, Coastal (Mr. Gummer), who, I suspect, will be bitterly disappointed by those on his Front Bench in a few minutes when we come to vote.
	Two things have been a common theme in the debate this evening. First, there is total incomprehension among people on both sides of the House of what the Government are proposing to do about bingo. Not a single person so far has spoken in support of what they advocate, whereas there has been a great deal of support for the variety of amendments before us. Secondly, it has come across loud and clear that not only do people oppose what the Government are doing but there is genuine passion for recognising the importance of bingo clubs in our communities and supporting them. Everyone who has spoken has shown understanding of the importance of what the roughly 600 bingo clubs provide in our communities. They provide much-loved entertainment—largely, as my hon. Friend the Member for Taunton (Mr. Browne), who spoke from our Front Bench, has pointed out, for women, older people and people who are less well off. As we have all said, it is crucial to try to maintain that soft form of gambling so that we do not drive people into much harder forms.
	The other thing that has come out in the debate is the fact that there is some surprise at the Government's incompetence as regards getting the figures right. Let us look, as many have done already, at page 153 of the Red Book. It is very clear what the Government think will happen. There is the very welcome removal of VAT on participation—incidentally, may I be the only one to pay tribute today to the Government for helping bingo by increasing the number of machines that clubs can have? However, that removal of VAT, the Government claim, will save the industry £50 million in the first year rising to £60 million in 2011-12. The bingo industry will then lose, through the increase in bingo duty, from 15 to 22 per cent. Many people have pointed out that those figures are meant to be an estimate; frankly, they are total fantasy. We know what is happening as a result of the Government's loss at the EU tribunal in respect of duty on interval bingo, gaming bingo and so on. Many of the companies are not paying that duty. The Government's figures are way out of order.
	We have not yet had an answer to the question that the hon. Member for Hammersmith and Fulham (Mr. Hands) asked the Minister about whether the Government have taken account of irrecoverable VAT, but on the assumption that they have not, which I suspect is the case, that is a further example of the figures being way out of line.
	The Government have done something that is incomprehensible because it will cause further damage to the bingo industry. Thirty clubs have closed in the past year, and more than twice as many since 2007. Only last week Gala, one of the major companies, announced that a further five clubs would close, and it explained to the Treasury that that was largely because of the taxation issue. No one can understand why the Government are doing something that could be so damaging to something so loved by people in our communities.
	The right hon. Member for Suffolk, Coastal, among others, made it clear that there is another matter about which there is total incomprehension. Why have the Government failed to grasp the nettle of dealing with the different issues raised by the various forms of gambling in this country? Soft forms of gambling like bingo lead to very little addiction, but the harder forms like online gambling lead to high levels of addiction. Why can we not have a differential taxation policy, with a lower rate for soft forms of gambling and a higher one for the harder forms?
	My hon. Friend the Member for Taunton was wrong about one thing. He said that online bingo was taxed at 15 per cent., but the truth is that it is rarely taxed at all, because the vast bulk of it is run through offshore websites that pay no tax in this country. Even if they are subject to European Economic Area regulation, or whitelisting, they do not contribute to the process. They certainly do not make any contribution, as they should, to the costs of research, education and treatment.
	We need a differential tax regime. We certainly should not put the tax up to 22 per cent.; it should stay at 15 per cent. As the protesters in Trafalgar square and Westminster said recently, "One and five, keep bingo alive!"

Sarah McCarthy-Fry: I thank all those who have contributed to the debate, especially the hon. Member for Dundee, East (Stewart Hosie) and my hon. Friend the Member for Barnsley, Central (Mr. Illsley) for speaking to their amendments. I also thank the Front-Bench spokespersons from both Opposition parties, and I am grateful for the contributions from the right hon. Member for Suffolk, Coastal (Mr. Gummer) and my hon. Friend the Member for Stockton, South (Ms Taylor), as well as from the hon. Members for Wellingborough (Mr. Bone) and for Bath (Mr. Foster).
	As I am sure has been rehearsed many times, the rate increase is part of a package of measures that includes making bingo participation fees exempt from VAT. The principal aim has been to simplify bingo taxation; as we know, the industry has been asking for that for many years.
	Alongside the removal of VAT on bingo in this Budget, the bingo duty rate of 22 per cent. represents a reduction from a level of around 35 per cent. in 2003. We have to look at the effective tax rate which, on a comparable basis, was estimated at 24 to 25 per cent. before the Budget. The basis of that estimate was explained in some detail to the industry, which accepted it in correspondence with the Treasury before the Budget. However, the industry has since argued that the Red Book costing of the removal of VAT from gambling participation fees was wrong.
	Some hon. Members have mentioned the High Court case. We have made it clear in previous debates that costings were based on the law as it stood at the time of the Budget. Key assumptions in the costings came directly from information provided by the industry, so they are not a fantasy. That information from the industry included detailed modelling on the impact of extra irrecoverable VAT, as well as detailed information from smaller clubs.
	I have listened carefully to the concerns expressed by hon. Members today and in Committee, and I have read the transcript of the debate in the Committee of the whole House. I recognise the importance of bingo to local communities that has been pointed out by all those who have spoken this afternoon, and that is why we acted to simplify the regime, removing VAT and lowering the effective tax rate to 22 per cent. That is down from the 35 per cent. that was in place as recently as 2003, and it is below the 24 to 25 per cent. range in the pre-Budget report. Let me stress again that that figure was agreed with the industry at the time.
	That is not all that we have done. The Gambling Act 2005 removed the 24-hour rule and the old membership requirements. It also allowed bingo operators for the first time to retain stakes, to be paid out as prizes at a later date. The bingo sector has also benefited from changes to gaming machine law, so it is not true that we are not helping it—and of course, the help that we are giving is ongoing. Despite my short tenure in this post, I have already met representatives of the industry, and that consultation will be ongoing.
	All taxes are kept under review, but decisions are taken in the round at PBR and Budget time. All the amendments before us today would cost money—up to £35 million a year, depending on the amendment. That would have to be found from tax increases elsewhere or cuts in public expenditure.
	I will continue to engage with the industry. I have already asked for evidence and data from its representatives on the points that they have raised, some of which has been received and some of which we still await. The information will be rigorously analysed, as hon. Members would no doubt want us to ensure that the figures are accurate. We can assure hon. Members that we will continue to have discussions on the state of the sector and the impact of taxation in the run-up to the next PBR and Budget. I am afraid I cannot support any of today's amendments, but on my assurance that we will continue to work with the industry, I ask hon. Members to withdraw their amendments.

Stewart Hosie: We have had a good debate again. We should have these bingo debates more often. They seem to engender real information and real passion from real Members from real communities, which is always a good thing.
	The hon. Member for Barnsley, Central (Mr. Illsley) delivered another excellent defence of bingo clubs and communities, and an excoriating critique of the Government's assessment of the proposed tax changes. The right hon. Member for Suffolk, Coastal (Mr. Gummer) deduced that the Government have a new doctrine—to tax the poor to help the rich. The hon. Member for Stockton, South (Ms Taylor) made a gentle and thoughtful speech, and rightly made the case that the Government should think again.
	The hon. Member for Hammersmith and Fulham (Mr. Hands) was right to say that there was no justification for a 22 per cent. tax on bingo. He knows that the Government's VAT assessment is flawed. We have just heard the weakest defence of it from the Minister in her summing up. The hon. Member for Hammersmith and Fulham knows that it is likely that the Revenue was never entitled to levy the tax in the first place, he knows that it takes cognisance, wrongly, of irrecoverable tax. He must not be conned by the Government's attempt to obfuscate. It will be shameful if the Conservative Front-Bench spokesman refuses to back one of the amendments today, when the only person supporting him is the Government Whip. That is how bad the Tory Front-Bench position has become.
	The hon. Member for Taunton (Mr. Browne) drew attention to the sheer staggering ineptitude of the Government in not seeing the trouble coming down the track. He was right. He also said with some sympathy that the Minister had been given an impossible hand to play. The hon. Member for Wellingborough (Mr. Bone) spoke about the Flutters bingo club in Rushden. I feel as though I have been in it; the description was so intense and detailed. I am delighted that he said that he would support the amendment. The hon. Member for Bath (Mr. Foster) was right to say that not one speaker backed the Government in the debate, either today or on 13 May, and he expressed total incomprehension of the Government's actions.
	The Minister said that the effective tax rate for bingo had fallen. I am not convinced. Even if that is true, I am convinced that it leaves a profound unfairness—22 per cent. as opposed to 15 per cent. across the board. The only question is whether I should ask that we delay this for a year, or whether we should stick to the principle of fairness in the entire gaming sector. I think we must stick with the principle. I hope the Tories will find some principle in the next two minutes, and I seek leave to press amendment 4 to a Division.

Question put, That the amendment be made.
	 The House divided: Ayes 83, Noes 283.

Question accordingly negatived .

Clause 25
	 — 
	Agreements to forgo tax reliefs

Mark Hoban: I beg to move amendment 31, in page 15, line 40, leave out from 'unless' to end of line 9 on page 16 and insert
	'they have been made in accordance with section 257 of the Banking Act 2009'.
	After the excitement of bingo we move to clause 25, which is less exciting but more important for revenue raising.  [Interruption.]

Mr. Deputy Speaker: Order. Will hon. Members not staying for this debate leave the Chamber quickly and quietly?

Mark Hoban: Clause 25 creates a legal framework to enable any institution that has taken part in the arrangements set out in subsection (2) voluntarily to waive its tax losses. The clause was required to deal with the particular situation of the Royal Bank of Scotland, which agreed to forgo a certain element of its tax losses as part of its agreement to enter the asset protection scheme. Interestingly, the Government chose to encourage it to forgo its tax losses rather than some of the tax planning activities that the bank carries out on behalf of its customers. I am sure that the Government will be able to justify that later.
	This framework has been put in place to deal with the price that RBS will pay to go into the asset protection scheme. It is worth noting that when I tabled a parliamentary question asking about the amount of losses that RBS would forgo, the Economic Secretary gave a vaguely worded answer that rather suggested that no one quite knew. Of course the reason for that is that the agreement on the APS is yet to be signed. It may be some months before that happens, and I suspect that the losses to be forgone will not be finalised until that point.
	However, my concern is not so much that RBS has agreed to enter into the APS at a price—that is a deal struck between it and the Government—but about the breadth of clause 25. Subsection (2) creates a situation whereby if a company enters into an arrangement with any Government Department—not just the Treasury—it can forgo its tax losses if there are any guarantees, indemnities or payments. That potentially covers a wide range of schemes. It may cover the guarantees offered to the automotive sector for loans it is seeking from the European Investment Bank. Under subsection (2)(b)(iv), even the scrappage scheme may be covered, as it contains the phrase
	"gives other financial support or assistance to P or another person (whether in money or otherwise)."
	So even an arrangement in kind could create a situation whereby a company could agree with the Government that in return for such assistance it would forgo its tax losses.

John Redwood: Perhaps my hon. Friend will permit me to go back to RBS. Is he aware that although it would be good news in future if the company had to pay more corporation tax, at the point of sale of the shares back into the private sector taxpayers would get a lot less money because they would get the tax losses forgone knocked off a rather big multiple? This gives rise to a rather difficult situation relating to whether taxpayer value is being protected.

Mark Hoban: My right hon. Friend, who has a great deal of experience in the City, makes an important point that we did not touch on in Committee: what is the value of the losses forgone, and how will they be valued in the market? That is a point to bear in mind for the future.
	As I said, my concern is not so much about RBS as about the breadth of the scheme. My amendment would narrow its breadth by tying it back to the Banking Act 2009, which the Economic Secretary and I spent many happy hours debating in Committee. I sought to link my amendment back to the part of the Act that relates to the provision of financial assistance. That would narrow the range of events in which a company could forgo tax losses to those that relate to any banking bail-outs. That would cover RBS in the context of the APS, but it would not cover, for example, guarantees from the Government for loans made to the automotive sector from the EIB.
	That is the rationale behind my amendment. When we debated this in Committee with the first of the three Exchequer Secretaries that we had to deal with during the course of our proceedings, the hon. Member for Wallasey (Angela Eagle) said:
	"This is a narrow provision and must be agreed between the company that is asking for support and HMT. Although it is potentially wide, paradoxically it is also narrow at the same time." ——[ Official Report, Finance Public Bill Committee, 2 June 2009; c. 210.]
	My amendment would make it narrow from the outset and limit the range of transactions that could be entered into that could lead to a firm giving up its tax losses. That would make it much clearer what the clause is meant to do, and potentially protect companies from undue pressure being placed on them by the Treasury and other Departments to forgo their tax losses in return for a particular scheme or set of arrangements that the Treasury or other Department might wish to encourage them to enter into.

Ian Pearson: Clause 25 ensures that an agreement reached between a company and the Treasury will be effective for tax purposes if the company relinquishes its right to use tax losses as part of an agreement to access Government financial assistance. The clause will apply to arrangements forming part of an agreement under the asset protection scheme but, as the hon. Member for Fareham (Mr. Hoban) noted, it could be used in other situations, particularly if Government assistance is required to maintain financial stability and restore confidence. It is essential that when such an agreement is reached, we have provision in tax law for the agreement to have the intended effect.
	As the hon. Gentleman pointed out, the amendment is intended to limit the scope of the clause to arrangements made in accordance with section 257 of the Banking Act 2009, thus making implementation of the clause subject to the laying of a statutory instrument. It is similar in purpose to amendments that he tabled in Committee.
	On the technical aspects of the amendment, it has been pointed out previously that a statutory instrument would delay the resolution of the terms of any agreement, which could reduce rather than boost market confidence. If a company's agreement to give up its losses were contingent on subsequent parliamentary approval, there would need to be provision in the agreement itself to revisit its terms if that approval were not given. Such terms would mean that the agreement would not have the necessary certainty to achieve its aim of restoring confidence and stability to the markets.
	The hon. Gentleman made the point that he wanted to narrow the scope of the clause. It is important to bear in mind that it can apply only if a company has agreed to relinquish its losses and if that agreement is pursuant to the company's accessing financial assistance from the Government. He referred to comments that have been made previously about a potential paradox, in that the clause may be seen to be necessarily wide-ranging but will be applied only in narrow circumstances. We believe that limiting the scope of the clause is unnecessary, and that the resulting extra layer of scrutiny would be potentially destabilising. It may mean that deals would need to be struck with absolute certainty and in a very short time scale.
	My experience of Governments is that they tend to prefer cash to an agreement on tax losses. It would be up to a company that wanted financial assistance to agree voluntarily to relinquish its taxes, and it would be up to the Government to agree that that was in the best interests of taxpayers. In the normal scheme of events, Governments would much prefer to have cash than tax losses, so I do not believe that the clause will be used substantially. When it is necessary to use it in future, it will be right to do so. The amendment would unnecessarily restrict it and be potentially destabilising in the circumstances in which it is likely to be used. For those reasons, I ask the hon. Gentleman to withdraw it.

Mark Hoban: I am not entirely convinced by the argument about the delays that would be caused by agreeing a statutory instrument. If the Economic Secretary looks back over the history of the past few months, he will see that the Government have taken action to deal with Bradford & Bingley and the Dunfermline building society, for example, and taken measures that require statutory instruments to be approved. They have gone ahead with that quite happily, but now they claim that they cannot act without a statutory instrument that the House of Commons has approved. It is not the Government's strongest argument.
	I am not sure about the Economic Secretary's assurance that the power will not be used often. Many clauses, which we are assured will not be used often, are included in Bills, yet the Icelandic banks were tackled under clauses in the Anti-terrorism, Crime and Security Act 2001. We must, therefore, be wary of Ministers' reassurances. However, in this case I will take them at face value. I beg to ask leave to withdraw the amendment.
	 Amendment, by leave, withdrawn.

Clause 59
	 — 
	Payments by reference to foreign tax etc

Amendments made: 41, page 28, line 16, after 'made', insert 'by a tax authority'.
	Amendment 42, page 29, line 6, after 'made', insert 'by a tax authority'.— (Kerry McCarthy.)

Clause 91
	 — 
	HMRC Charter

David Heath: I beg to move amendment 3, page 46, line 10, at end insert—
	'( ) In particular, the Charter must include policies in relation to prosecution and alternatives to prosecution, and the circumstances in which monies collected but legally returnable to any person may be retained pending futher investigation.'.

Mr. Deputy Speaker: With this it will be convenient to discuss the following: amendment 6, page 46, line 20, at end insert—
	'(3) The Charter prepared under section 16A (1) of CRCA 2005 shall not come into effect until it has been approved by a resolution of the House of Commons.'.
	Government amendment 43.
	Amendment 32, in clause 92, page 46, line 26, at end insert—
	'(3) That Schedule will cease to have effect on the fourth anniversary of the day on which this Act is passed.'.
	Amendment 14, in clause 101, page 51, line 23, at end insert—
	'(7A) Repayment interest is not taxable.'.
	Government amendments 44 to 46.
	Amendment 33, in schedule 46, page 353, line 21, at end insert—
	 'Annual report by Commissioners
	2A The Commissioners must, at least once a year, make a report on—
	(a) compliance by companies with paragraph 1 (1), and
	(b) the amount of additional tax collected as a consequence.
	2B The first report should be made not later than 18 months after the date on which this Act is passed.'.
	Amendment 7, in schedule 48, page 366, line 43, leave out from 'tax' to end of line 1 on page 367.
	Amendment 8, page 368, line 14, leave out 'Paragraphs (c) and (d) of sub-paragraph 2A do' and insert 'Paragraph (c) of sub-paragraph 2A does'.
	Amendment 9, in schedule 51, page 382, line 41, after 'a', insert 'deliberate'.
	Amendment 10, page 384, line 11, after 'a', insert 'deliberate'.
	Amendment 11, in schedule 52, page 392, leave out line 7.
	Amendment 12, page 392, leave out lines 10 to 16.
	Amendment 13, page 392, line 46, leave out sub-paragraph (7).
	Amendment 19, in schedule 54, page 410, line 34, leave out from first 'is' to end of line 35 and insert
	'the end of the accounting period in which the loss is incurred'.
	Amendment 20, in schedule 55, page 419, line 21, at end insert—
	'(3A) The aggregate penalties against partners of a partnership under this paragraph may not exceed the amount that could have been assessed on one partner.'.
	Amendment 21, in schedule 56, page 423, line 14, leave out 'by'.
	Government amendments 51 to 53.

David Heath: I do not intend to discuss the other amendments in the group, I simply wish to talk about amendment 3.
	I suggest that Her Majesty's Revenue and Customs charter needs to be expanded to make it clear how HMRC will deal with circumstances in which a prosecution is possible or intended. I note and am perfectly content with the fact that prosecution policy as such is already tackled. Revenue and Customs prosecutors are statutorily bound to the code of conduct for prosecutors, and the circumstances in which they undertake a prosecution are already spelled out in some detail and are largely analogous to those that apply to other prosecuting authorities in the criminal law.
	However, I am concerned that Revenue and Customs prosecutors are almost an afterthought. Many cases in which there is a suspicion of abuse of the tax system or even criminal behaviour are tackled in a non-judicial way—by direct recovery of funds, plea bargaining before passing papers to the prosecuting authorities, or a variety of civil actions, which HMRC increasingly takes as a substitute for criminal sanction. That gives us pause for thought. There is currently no clear policy for applying those sanctions, many are much more serious penalties than those in criminal law, and they are applied without due process—without being put before a court.
	I therefore contend that people who interact with HMRC in that way need to know that the rules are applied equitably and fairly across the piece, how HMRC will interpret its extensive powers, and what they can expect from HMRC. I want to illustrate that with a particular case of a company in my constituency, which involves the vexed question of carousel fraud. I do not want to spend time explaining the intricacies of carousel fraud, which is a complex form of VAT fraud, working across international boundaries. We could spend much time discussing the details of that. That is not my purpose; rather, my purpose is to address the way in which HMRC chooses to deal with companies that it suspects of having been involved in carousel fraud.
	The company with which I have had dealings in this respect is Third Dimension Ltd in Milborne Port. It deals in a commodity in which, in HMRC's view, companies involved in carousel fraud trade—namely, mobile phones—and provides a platform for the international market via the internet, enabling traders to trade across international boundaries in the mobile phone market.
	I have no truck with fraudsters. I want those involved in fraud to be interdicted and prosecuted. I certainly do not believe that fraud—either against the individual or, in the case of VAT, against the state—is a victimless crime. It is not, and I have always argued in this House that we should take it extremely seriously and impose appropriate sanctions. My constituents feel exactly the same way and they have expressed that view to me. They certainly do not want people getting away with VAT fraud.
	I also ought to say that I am neither a forensic accountant nor a VAT expert. If anyone asks me difficult questions, I will probably not know the answers, because we are dealing with a complex area. However, I have dealt with the criminal justice system over many years in this House and my gut feeling is that there is something inherently wrong with the system that seems to have developed, in that everybody who has any connection with a particular area of trading is treated as though they were guilty and has sanctions applied to them irrespective of any evidence of guilt.
	Indeed, one difficultly has already arisen in the courts in respect of how HMRC has interpreted its brief. The Financial Secretary will know of the Livewire judgment before the High Court chancery division, which has fundamentally undermined HMRC's assumption that every trader in that area is tainted by fraud, not least because of the observations of Mr. Justice Lewison. He looked at the previous case that was relevant—the Kittel case, with which I am sure the Minister is also familiar. In particular, he looked carefully at the translation from French to English, which is a pretty rudimentary matter. His observation was that HMRC's incorrect translation changed the emphasis to
	"the transaction was connected with a fraud"
	from the original, which said:
	"the transactions were directly involved in a fraud".
	HMRC misinterpreted the Kittel case, assuming that anybody with a passing connection with the trade was necessarily up for involvement, rather than applying the higher burden of proof implied in the original French of the Kittel judgment, which requires evidence of direct involvement. That case is now being challenged in the European Court of Justice and we may have a ruling in due course. Irrespective of that judgment, however, surely we do not allow collective punishment in British law for the crimes of a person or persons unknown, yet that appears to be how HMRC currently operates.
	Since early 2006, HMRC has adopted what is described as an extended verification process for every trader involved in the industry, which means that it has effectively ceased paying VAT input tax refunds. A substantial amount of money is being withheld and we are now in the third year of withholding it. This has been done by a deliberately extended process, in my view. First, there is a delay in responding to requests for refunds. At the very point at which that matter reaches judicial review—sometimes only a matter of hours beforehand—there is a denial, which results in a further delay before a tribunal can consider the matter. That is followed by an HMRC appeal. That is a deliberate policy to withhold funds that are legally in the ownership of the companies, without judicial process.
	When such cases have got as far as the tribunal or the High Court in chancery, there have been mixed results for the companies appealing. In some cases, the appeal has been upheld by both; in others, there has been a mixed result from the tribunal and the High Court; or the company has lost in both cases. I would be interested to know how much is currently withheld in relation to VAT reclaims, and how much is earmarked for eventual refund when the appeals are successful. My suspicion is that a very large amount is involved.
	The second method that HMRC has chosen to use as a means of reprisal against assumed fraud is illustrated in its dealings with overseas banks. HMRC uses its undoubted muscle to affect the way in which overseas banks are used. My constituent's company had funds held by the First Curaçao International Bank. The bank has effectively been closed down by HMRC, and the administrators have been told that they must not allow any funds to be given to those who have funds invested in the bank. No charges have been brought against the bank, under British jurisdiction or any other; this is simply a case of pressure being put on it.
	A list has apparently been provided to the bank's administrators of the people to whom funds may not be made available, and of anyone having dealings with those people. That is a pretty extraordinary state of affairs. Those people have not been brought before any court. They have not been found guilty of any crime, yet they have had their funds frozen on suspicion and, in the case of the First Curaçao International Bank, in a foreign jurisdiction. I am led to believe that, in this context, we are talking about billions of pounds in funds held by companies, many of which must be innocent of any fraud.
	The third instance of intervention is the pressure that has been applied to UK high street banks. Again, companies engaged in this area of trade have had their accounts closed on the recommendation of HMRC. They, too, are companies against which no evidence has been adduced, no prosecution brought and no conviction obtained. I would be interested to know how many companies have been closed in that way and, against that figure, how many have actually been prosecuted.
	I suspect that what is happening is a substitution of a criminal legal process by a civil legal process that is entirely within the hands of HMRC, and I do not believe that the House has ever sanctioned such a process. Extra-judicial action by HMRC in the absence of any evidence is not something that we would normally countenance. If we were to do so, we would certainly place limits on the sanctions that could be applied—just as we place limits on the sanctions to be applied in criminal cases—rather than simply giving HMRC a free hand.
	What we have here is an arbitrary exercise of power by HMRC without any due process. It is an exercise of guilt by association that is foreign to British law in any respect, either historically or currently. It involves the substitution of the opinion of HMRC for a judgment, and the testing of that judgment by probative means, in court. I have to say that HMRC opinion is not unquestionable and it is not by definition correct. If it were, these companies that are so strongly suspected of being involved in VAT fraud would not have been given VAT registration in the first place.
	The amendment is designed to make transparent a process that seems to have developed. If it is believed right and proper for HMRC to use civil process in this way to deal with unquestionably serious matters of fraud, these issues should be put before Parliament and agreed here. We should apply proper tests of evidence, proper judicial process and appropriate sanctions in the case of the felony, for that is what it would be if the case were proven. Instead, we have seen an incremental approach by HMRC, which I do not believe is satisfactory.
	To conclude, I have no evidence whether the company in my constituency or any of the other companies have been involved in fraud. How could I possibly know? What I am saying is that while I want HMRC to be rigorous in its approach, I also want it to be transparent and lawful. I do not believe that the actions currently taken by HMRC are, frankly, lawful. We have due process in this country and it should be transparent. I invite the Minister to answer my points if he can, as I would be grateful to know the answers, but I would also like to hear him accept the principle that such processes should be open, transparent and agreed by Parliament, rather than somebody in the recesses of HMRC deciding that they have a means by which they can exercise their powers without judicial process.

David Gauke: It is a pleasure to follow the hon. Member for Somerton and Frome (Mr. Heath), who has raised a number of important points, which I hope to touch on in the context of the HMRC charter and amendment 6. The group of amendments is rather lengthy, so I shall try to run through my amendments as quickly as possible.
	Clause 92 and schedule 46 relate to the senior accounting officer and the new responsibilities placed on him. We debated the matter in Committee of the whole House and, indeed, in the Public Bill Committee. My hon. Friend the Member for Fareham (Mr. Hoban) pointed out on a number of occasions how the proposals were produced in the Budget and the Finance Bill without any consultation, yet there are concerns about their impact on large companies and about the scope of the clause.
	We are grateful that the Government have tabled amendment 43, which applies the measures not to "large" but to "qualifying" companies. That is a step forward, but we none the less have a number of doubts, particularly about the lack of clarity on the administrative costs to affected companies. No proper regulatory impact assessment was done prior to the announcement because the necessary consultation did not happen, so some doubt necessarily remains.
	We know that the Government estimate that about £140 million will be raised by the measures, but there remains a degree of doubt about whether that will be the case. We have tabled two amendments which I think will help the House to assess the effectiveness of the proposals. Amendment 32 is a simple sunset clause and would enable the provision to fall after four years. If after four years it emerges that it is not causing a disproportionate cost to businesses to establish that the senior accounting officer can sign off the accounts, fair enough. If it proves that substantial amounts of revenue are being raised as a consequence of the provision, there will clearly be a strong case for renewing it, but if not—I have to say that at this stage we cannot be confident one way or the other—it will be dropped.
	Amendment 33, which relates to schedule 46, would require the commissioners to prepare a report on compliance with the new provisions and the additional tax raised. It would enable us to have a much better view of whether the measure was proving to be effective, given that consultation was not carried out in advance and its origin remains something of a mystery.
	Clause 95 and schedule 48 relate to the extension of information and inspection powers. We have tabled two technical amendments. Currently, there are powers to inspect property for valuation purposes, which relate to a number of taxes, including stamp duty reserve tax. The Law Society has questioned how those powers will be used, and I should be grateful if the Minister explains how they will be relevant to SDRT.
	Let me put amendment 8 in context. The tribunal may not approve an inspection under the new powers unless certain conditions apply. They include the ability of the relevant taxpayer to make representations, the ability of the occupier of the premises to make representations, and the supplying of a summary of the representations to the tribunal. Those conditions are disapplied if the occupier of the premises cannot be identified.
	It is reasonable for the requirement to supply a summary of the representations to the tribunal not to apply if the occupier cannot be identified, but why should it not apply if the taxpayer is able to make representations? If the taxpayer makes representations, there will be no obligation for a summary to be supplied to the tribunal. That seems somewhat strange. We seek to amend schedule 48 so that the occupier would not be given an opportunity to provide representations, but a summary could still be provided if the taxpayer has made representations.
	Paragraph 15 of schedule 51 provides, broadly, for a 20-year time limit for assessments in a case involving a loss of tax attributable to a failure by a person to make a return under the stamp duty land tax legislation. Normally, the time limit is six years. The Law Society has told us that the period should be extended from six to 20 years only when failure is deliberate, rather than inadvertent and careless. Consequently, we have sought to address that in amendment 9, and similarly in amendment 10 tabled to paragraph 16 of schedule 51, by making the requirement a deliberate failure.
	Clause 99 and schedule 52 relate to the recovery of overpaid tax, setting out circumstances where a claim is disallowed. One of those—case A—is if a mistake is made in a claim, election or notice. The Law Society made the point that a mistake that gives a right of recovery against HMRC could result in a mistake in a claim, and therefore the unfortunate situation could arise that a mistake by HMRC leads to a mistake in a claim which then, in turn, means that the claim is disallowed. The second concern raised with us by the Law Society is what exactly a mistake means in those circumstances. The Minister might be able to help on those points, which relate to amendment 11.
	Amendment 12 highlights the fact that there is a separate regime for mistakes relating to capital allowances. Will the Minister explain why capital allowances are singled out? Finally in terms of schedule 52, amendment 13 relates to case F, which excludes amounts paid, or liable to be paid, in consequence of enforcement action. Why are proceedings for enforcement relevant to HMRC's liability under the schedule?
	Clause 101 and schedule 54 relate to repayment interest on sums to be paid by HMRC. Amendment 14 seeks confirmation that repayment interest is not taxable. Will the Minister respond to that point? Amendment 19 essentially asks why the repayment interest start date should be on 31 January next, following the year in which the loss is incurred, rather than at the end of the accounting period in which the loss is incurred, which is what we have sought to achieve in amendment 19.
	Clause 105 and schedule 55 relate to the penalty for failure to make returns. Paragraph 25 of the schedule states that where a representative partner fails to make a partnership return, a
	"penalty in respect of the failure is payable by every"
	person who was a partner in the partnership at any time during the relevant period. Amendment 20 would ensure that aggregate penalties are limited to the amount that could have been assessed on one partner. Otherwise, penalties could be more harsh where a partnership is late in making a return than where a company of equivalent size is late in equivalent circumstances. There does not seem to be any particular logic as to why the regime should be harder on a partnership as a whole than a company.
	Clause 106 and schedule 56 relate to the penalty for failures to make payments on time. Amendment 21 would delete what I believe to be a typo. The Minister is a reasonable man and I assume he will accept it; if he does not, I am perfectly prepared to divide the House, but I am sure he will not make that necessary. The current wording of the schedule is as follows:
	"that person fails to make or deliver the return on or before by the date by which it is required to be made or delivered".
	That first "by" appears to be a typo, and therefore should be removed.
	In respect of clause 107 and schedule 56, the amendments are of a technical nature. The clause and schedule enable taxpayers to benefit from the suspension of penalties during the time-to-pay arrangements even if they have already incurred a late payment penalty. That ensures that any penalties arising after a taxpayer's approach to HMRC will be suspended.
	I want to deal with the HMRC charter last because we have now gone through a number of clauses and schedules relating to HMRC powers. It is striking that every year we generally extend HMRC's powers in this area as part of a process relating to powers, deterrents and safeguards. We spend a lot of time scrutinising the powers and deterrents, but very often the argument for the safeguards is that they will be set out in the HMRC charter. We debated the charter in Committee—the first draft of it caused considerable concern, but I acknowledge that the Government have moved on it. There remain some discussions to be had on this important document, and it is important that the House scrutinises how HMRC works and the safeguards that exist for the taxpayer. That is, in essence, the argument made by the hon. Member for Somerton and Frome.
	The fact is that the House has very little oversight of the HMRC charter. We have had an opportunity to debate it in our consideration of the Bill and I dare say that we will be able to do much the same when we consider future Finance Bills. Amendment 6 would allow the House to debate the charter again before it is published and before it is finalised, so that the views of right hon. and hon. Members can be expressed and there is an opportunity to raise the concerns of constituents. Constituents have also come to me to discuss how they are treated while the Government and HMRC seek to address carousel fraud. That is but one example, and I am sure that hon. Members can identify others. It is important that the House has an opportunity to debate them.
	I have covered, as quickly as possible, a large number of amendments, some of which are technical, others of which are broader in nature. I reiterate that it is important that the House scrutinises HMRC and that we ensure that the right balance is found between the powers, penalties and deterrents available to HMRC and the safeguards available to taxpayers. I press the Government to share that view, and I hope that we have future opportunities to debate the HMRC charter.

Colin Breed: for raising specifically the issue of what the charter should cover, as the charter is an important aspect of this Bill. The Minister will recall that the Government announced a consultation on a taxpayers charter last year and we were given a ministerial statement on the matter. During the Report stage of last year's Finance Bill, my Liberal Democrat colleagues and I tabled a new clause entitled "Taxpayers Charter". Of course, it did not succeed, but we are grateful that something similar has appeared in this Bill.
	It is important that taxpayers' statutory rights, including the basic right of appeal against actions or decisions, is enshrined in some way, and the same applies in respect of taxpayers' statutory duties—I am thinking of provisions relating to notice period requirements, documents that HMRC has a right to access and penalties for failure to comply. We are very happy about that arrangement, but clause 91 would insert a new section into the Commissioners for Revenue and Customs Act 2005. This clause only pays lip service to the call for a charter. In reality, it provides little or no protection or certainty for the taxpayer and, indeed, pays the taxpayer little regard. The charter cannot be independent if HMRC is solely to decide its content. I appreciate the amendment that the official Opposition have tabled to ensure that the House debates that issue, because it is important.
	We would have liked the Government to consult on the content of the charter well before now. We have spent quite a lot of time consulting on stricter penalty regimes and very little on protecting the taxpayer. As I understand it, the charter will not be in statute—only the power to create a charter. That is a slight disappointment. The Bill says that the standards and values are to be "aspired" to, but there will be no way of requiring HMRC to meet and maintain the standards that it should already have achieved. The review of HMRC's adherence to the charter would not require any consequential action. If HMRC fails to meet the aspirations in the charter, there is no provision to discipline it or enable parliamentary pressure to be applied,
	While we welcome a charter setting out the rights and duties of the taxpayer, no protection is afforded to the individual. In fact, the Government have spun reforming ideas around to suit the interests of HMRC, rather than to protect the taxpayer. We do not have a taxpayers charter, but an HMRC charter—not what was envisaged at all. Some of our concerns are shared by professional bodies. The Institute of Chartered Accountants says:
	"The current wording of the clause does not meet the needs of taxpayers. Firstly, it is drafted in terms of HMRC's 'behaviour and values' rather than the rights of the taxpayer. Secondly, it does not make adequate provision for oversight and review."
	We have spent much time in recent Finance Bills extending the powers of HMRC in various ways, including the right to impose penalties, to make inspections, to collect data and to charge interest on late payments. Everything has been going HMRC's way, and this was an opportunity to try to redress the situation, but the Government have failed to do so.
	Clause 92 concerns senior accounting officers. I can understand the Government's approach, which would identify someone who would be responsible for ensuring that the accounting systems are adequate and accurate for tax reporting. It refers to the preparation and submission of returns to HMRC, not tax figures in financial statements. The SAO must ensure that tax returns are timely and procedures are adequate for accurate tax reporting. The adequacy of the systems must be certified annually, because the tax code changes with alarming regularity. Systems have to be changed almost annually to ensure that the data in returns are accurate. The SAO will be personally liable for a penalty of up to £5,000 for careless or deliberate failure to comply with the rules. According to the impact assessment, some 2,000 individuals will need to comply with this new regime.
	The regime is supposed to target large companies, but the definition of large is not exact. Indeed, the Government have tabled some technical amendments to try to address that issue and ensure that we are targeting the right sort of large companies. That lack of definition is slightly disappointing in provisions that will charge individuals with some heavy responsibilities, for which the penalties can be significant—not only in financial terms, but in professional terms, because a person's ability to retain their job or get another one might be limited if they were found liable in this respect. It is important that the Government have tight definitions and an understanding so that those individuals—it has been assessed that there are about 2,000 of them—have clear and accurate information about what their responsibilities are and what they have to do, and do not find themselves falling foul of inaccurate definitions or definitions that can be construed or introduced in different ways that could disadvantage them in their work.
	Finally, on the issue of cost, although I can understand why the Government are formulating this proposal, there are serious concerns that businesses will face quite a considerable increase in costs, bearing in mind the potential of the expected yield. Do we have real proportionality? Will the costs incurred by businesses up and down the country be proportionate to what the expected yield might ultimately be? I would be grateful if the Minister could comment on that.

Stephen Timms: This group of amendments relate to the tax administration elements of the Bill. The formation of HMRC and the merger of the previous separate bodies provided a lot of opportunities to deliver more consistency and clarity for taxpayers and businesses. We are taking advantage of those opportunities in this part of the Bill.
	The package has been the subject of extensive consultation. The key elements replace myriad complex penalties and surcharges with a more effective and proportionate penalty structure with improved safeguards; replace the confusing old range of interest rates and formulae with a new regime based on recompense, fairness and simplicity; make it easier for taxpayers to pay what they owe on time, so supporting HMRC and tackling effectively those who pay late; extend the compliance checking introduced in the Finance Act 2008 to other taxes, clarifying where visits can be made and what time limits reply; and pave the way for the launch of the new HMRC charter by the autumn. The hon. Member for South-East Cornwall (Mr. Breed) just commented on that, and the charter will play an important role in the relationship between HMRC, taxpayers and agents, setting out taxpayers' rights and responsibilities.
	The hon. Member for South-East Cornwall quoted criticisms from the Institute of Chartered Accountants of England and Wales. I think that since those criticisms have been made they have been overtaken a bit by developments and I can reassure him by quoting what the ICAEW's briefing said to the Finance Bill Committee on 17 June:
	"We support the current version of the Charter which we believe is a well balanced document which sets out the rights and obligations of the taxpayer."
	That tax administration package runs in parallel with measures to protect tax revenues. There has been a lot of discussion with interested parties on these measures and I want to place on record my thanks for the help that we have received.
	Amendment 3, which was moved by the hon. Member for Somerton and Frome (Mr. Heath), is not really about the charter, as I think that he would accept. He has taken the opportunity to raise perfectly fair points about the HMRC approach to carousel fraud. This is probably not the place for an extensive discussion on that subject. However, he acknowledged that the scale of such fraud was vast. We were threatened with a loss of more than £5 billion in 2007-08, and that level of fraud obviously requires HMRC to take every reasonable and proportionate step to prevent it. I would suggest to the hon. Gentleman that the response has been proportionate.
	HMRC will withhold repayment where there are reasonable grounds to suspect knowledge of fraud. That approach is being supported by the courts when it is challenged. Such fraud is perpetrated by criminals seeking to steal vast sums of public money. It is complex and orchestrated by criminal gangs using what often look like legitimate trading companies, but the fraud only works if there is complicity in the supply chains, which often are very long. I suggest that it is not unreasonable for HMRC to expect companies to take steps to satisfy themselves that their transactions are not part of a fraudulent supply chain.
	If HMRC could use only criminal proceedings to prevent fraudulent repayments, I am afraid that the criminal justice system would rapidly grind to a halt. It is right that HMRC has civil powers to tackle fraud where the risk to the Exchequer is as significant as it is in this case. The powers that HMRC is using to protect taxpayers from organised crime exist already and are not new.
	Safeguards are in place, and I should be very happy to discuss our approach with the hon. Member for South-East Cornwall separately, but I do not think that the HMRC charter is the vehicle to address this problem. None of the representative bodies that we consulted suggested that this specific point about fraud should be in the charter.
	Amendment 6 would delay the charter coming into effect until it had been approved by a resolution of the House. I do not think that that would be the right thing to do: the charter is intended to be a document that can be easily updated, and an advisory panel with a majority of external members will monitor performance. It would not be appropriate for approval by the House to be necessary whenever the wording of the charter was updated.
	Amendment 32 would impose a four-year time limit on the application of clause 92. That would imply that, in four years' time, large companies no longer needed to maintain tax accounting arrangements. That would be a mistake. As the House will be aware, we have significantly amended clause 92 to include the reference to materiality that the hon. Member for Fareham (Mr. Hoban) first suggested. I do not think that we should have a sunset clause to constrain it further.
	Amendment 33 would require an annual report on the impact of the measure, but it strikes me that reviewing the benefits of one measure in isolation would be of limited value. HMRC looks at the tax compliance position of large businesses, and its relationship with them means that it takes a wide range of factors into account. I do not think that it would be helpful to divert HMRC resources into an annual assessment of one measure in isolation.
	Government amendment 43 is a consequential amendment to align the terminology in clause 92 and changes the reference to "large" companies in schedule 46 to "qualifying" companies. I am grateful to the hon. Member for South-West Hertfordshire (Mr. Gauke) for welcoming that.
	Amendment 7 would remove stamp duty reserve tax from the narrow list of taxes to which the new aligned power to inspect property for the purposes of valuation applies. HMRC has to undertake valuations for stamp duty reserve tax, because the consideration for shares on which the tax arises may be in the form of property. The value of the property affects the value of the transaction, and the new power replaces existing individual powers for each tax, including stamp duty reserve tax. The powers being replaced took different forms and had different safeguards, and the new power has been welcomed because it has stronger safeguards. It is proportionate and necessary and includes improved taxpayer safeguards, so I hope that amendment 7 will not be pressed.
	Amendment 8 relates to the valuation inspection power more generally. In Committee, I was pleased that Opposition Members appreciated that the clause providing for property valuations contained considerable improvements in the safeguards for taxpayers. The importance of that provision is recognised across the House, because the strongest possible safeguards should apply. The amendment would strengthen those safeguards, so I am content to accept it.
	Sadly, I cannot be as helpful with amendments 9 and 10, both of which relate to stamp duty land tax. They would restrict to four years the time limit for HMRC to make assessments where the taxpayer has failed to notify it of a land transaction, unless that failure was deliberate. The provisions that we have reassure the majority who pay their taxes that those who try not to pay them will have to do so in the end. It would not be fair on the compliant majority if, after a period, people who failed to notify did not have to pay the tax because the limit had elapsed. I hope that those amendments will be withdrawn.
	Amendments 11 and 12 seek to widen the scope for HMRC to accept a claim for repayment by removing some of the exceptions, but the capital allowances system is designed to give taxpayers very wide flexibilities and choices. Businesses have made it clear that they value those flexibilities and choices and would not want them to be curtailed. If a claim is out of time and it is not appropriate to extend time limits under the existing rules, there would be no reason to allow a claim under this provision to achieve the same end. I hope those amendments will not be pressed.
	Amendment 13 seeks to remove an exclusion which applies where HMRC started court proceedings to recover a sum and either obtained court judgment or the taxpayer agreed to settle the matter. By the end of the process, the taxpayer will have had every opportunity to contest the amount due. HMRC will have had to satisfy the court that the debt is due or the taxpayer will have had to agree to settle HMRC's claim in order for the exclusion to apply. To allow taxpayers the possibility of further disputing the amount would seriously weaken HMRC's ability to recover tax liabilities from defaulters.
	On amendment 14, as each tax is brought into the new interest regime, consequential changes to existing legislation will be made by regulations, using the powers in clause 103. These changes will ensure that the result that the hon. Member for South-West Hertfordshire is seeking will be achieved. On amendment 19, the hon. Gentleman explained the effect of the proposal. The position is provided for in schedule 54 and is in line with the general rules that apply when repayment interest starts to run. Amendment 19 would be inconsistent with those rules and I must therefore resist it.
	Amendment 20 relates to schedule 55, which creates an aligned and modern penalty regime to deter failures to submit tax returns. It is right that where an obligation to submit a return exists, failure to do so should result in a penalty. However, we consider every proposal on its merits. I agree that amendment 21 corrects a minor drafting error. I am grateful to the hon. Member for South-West Hertfordshire for drawing the attention of the House to it, and I am happy to accept amendment 21.
	Government amendments 44 to 46 in clause 107 and Government amendments 51 to 53 in schedule 56 correct technical deficiencies that could lead to taxpayers not being able to benefit from the suspension of late payment penalties in the way that was intended. I believe they will find favour across the House.

David Heath: I congratulate the hon. Member for South-West Hertfordshire (Mr. Gauke) on having won two amendments in a Finance Bill—quite a proud record. I am grateful to him for his support for some of my contentions, as I am to my hon. Friend the Member for South-East Cornwall (Mr. Breed).
	With reference to the Minister's comments on my amendment, we agree about the seriousness of the fraud, the potential loss to this and other jurisdictions, and the need for effective interdiction and penalty. I make it plain, however, that I still have concerns. The Minister says that the response of HMRC is reasonable and proportionate. Clearly, it is reasonable and proportionate to take those confiscatory measures in the case of somebody who is perpetrating a fraud, but by its actions HMRC seems to be extending that to anyone who is associated with a trade in which fraud has taken place, and I am not sure that it is reasonable and proportionate to take confiscatory action against a person or company who is trading in that environment if they, in turn, have taken measures which are reasonable and proportionate to make sure that they are trading lawfully and not encouraging or permitting fraudulent behaviour by others.
	The "reasonable suspicion", which the Minister says is the test, is of course put to the test only when the case is before a tribunal or the High Court. The way in which matters have been—I was going to say "prosecuted", but that is exactly the wrong term to use—carried out hitherto suggests that that finding of fact happens at a very late stage in the process. According to information that I have received, a large number of those cases are not found to be based on reasonable suspicion when a tribunal or, more particularly, the Court, has had a chance to adjudicate. That is what worries me. Having heard what the Minister said, I still feel that there is an extra-judicial process going on; it is perhaps necessary in some cases, but in others it is excessive.
	The Minister has found me out, in the sense that he has realised that amendment 3 was a probing amendment to enable me to raise essential matters on behalf of my constituents and others. I would be most grateful if, having looked again at my remarks, he would write to me to explain the Government's position, perhaps in slightly more detail than is possible in a speech. I may well then take him up on the suggestion that we discuss the matter privately. It is certainly not my intention to divide the House this evening, and I beg to ask leave to withdraw the amendment.
	 Amendment, by leave, withdrawn.

Clause 92
	 — 
	Duties of senior accounting officers of large companies

Amendment made: 43, page 46, line 23, leave out 'large' and insert 'qualifying'.— (Mr. Timms.)

Clause 107
	 — 
	Suspension of penalties during currency of agreement for deferred payment

Amendments made: 44, page 55, line 1, leave out from beginning to 'P' in line 2.
	Amendment 45, page 55, line 4, leave out
	'whether before or after that date,'.
	Amendment 46, page 55, line 10, leave out 'during' and insert
	'between the date on which P makes the request and the end of'.— (Mr. Timms.)

Schedule 34
	 — 
	Real Estate Investment Trusts

David Gauke: I beg to move amendment 17, in page 289, line 23, at end insert—
	 'Stock dividends
	3A (1) Section 107 (conditions for tax-exempt business) is amended as follows.
	(2) In subsection (8) omit "(a) by way of dividend, and (b)".
	(3) After subsection (8) insert—
	"(8A) In this Part and for the purposes of section 973 of ITA 2007, a distribution of the profits of the property rental business shall include—
	(a) an amount distributed by way of dividend, and
	(b) an issue of shares to which section 249 (1)(a) of ICTA applies and in case a falling within (b). the amount of the distribution shall be the cash equivalent of share capital determined in accordance with section 412 of ITTOIA 2005, but otherwise Chapter 5 of Part 4 of ITTOIA 2005 shall not apply.".
	3B (1) Paragraph 6 of Schedule 17 is amended as follows.
	(2) In paragraph 6 (4), delete "by way of dividend and (c)".
	(3) After paragraph 6 (4) insert—
	"(4A) In the application of section 107 (8A) for 'profits' substitute 'UK profits' as defined in paragraph 6 (4).".
	(4) Section 142 (1) of TCGA 1992 is amended by inserting "or section 107(8A) (b) 2006" after the reference to "ITTOIA 2005".'.

Mr. Deputy Speaker: With this it will be convenient to discuss the following: Amendment 18, in page 289, line 23, at end insert—
	 'Conditions for tax-exempt business
	3A (1) Section 107 (conditions for tax-exempt business) is amended as follows—
	(2) In subsection (8)(b) after "before", insert "the third anniversary of ".
	(3) The amendment made by sub-paragraph (2) has effect for distributions in respect of accounting periods beginning on or after 1 January 2008 and ending on or before 31 March 2010.
	3B (1) Schedule 17 is amended as follows.
	(2) In paragraph 6 (4) after "before", insert "the third anniversary of".
	(3) The amendment made by sub-paragraph (2) has effect for distributions in respect of accounting periods beginning on or after 1 January 2008 and ending on or before 31 March 2010.'.
	Government amendment 47.
	Amendment 15, in page 290, line 24, at end insert—
	 'Profit: financing-cost ratio
	5A (3) Section 115 (4) is amended as follows.
	(4) In subsection 115 (4) (a) after "costs giving rise to", insert "credits or".
	(5) In subsection 115 (4) at end insert "but exclude—
	(f) financing costs falling within (a) to (e) above which are exceptional due to their size or incidence.".'.
	Amendment 16, in page 290, line 29, at end insert—
	 'Termination by notice: Commissioners
	6A (1) Section 129 is amended as follows.
	(2) In section 129 (2) (c) at end insert "but a breach of the condition in section 107 (8) where the company is in financial difficulties shall not be treated as serious".
	(3) The amendment made by sub-paragraph (2) is to be treated as always having had effect.'.

David Gauke: This group of amendments relates to real estate investment trusts, or REITs, which were introduced with effect from 1 January 2007. Their introduction was, in part, a response to Kate Barker's review of housing supply and the need to promote greater efficiency and flexibility in the UK property investment market. Two and a half years after their introduction, it is possible to make some evaluation of the effectiveness of the new REIT regime. It is clear that large property groups have obtained REIT status, but there have been no new REITs, and in particular none covering residential property. It would be fair to say that the economic climate has not been ideal for the creation of new REITs, but there is clearly a debate to be had on whether the fact that REITs covering residential property have not come into effect is down to the economic problems or defects in the tax system.
	Since we debated the matter in Committee, the House of Lords Select Committee on Economic Affairs has commented, in its report on the Finance Bill, that REITs
	"have failed to live up to expectations" .
	Paragraph 245 of that report states:
	"It is difficult to conclude that this partial failure is wholly due to the economic circumstances and not also in part to structural defects in the system. Moreover there has been little attempt to respond flexibly or significantly in their design to the difficult economic context."
	The group of amendments that we are considering is an attempt to encourage the Government to respond flexibly and significantly. Indeed, the Government have made some progress on that front. In Committee, I raised possible ways of providing some flexibility in design, based on proposals made by the British Property Federation. Since that date, the House of Lords Select Committee has recommended that the Government
	"look again with greater sympathy at the proposals by the representative bodies."
	To assist, we have today tabled four amendments, which, as I say, are based on the British Property Federation proposals. We are pleased to see that in one case the Government have followed suit, at least partially, and tabled an amendment seeking to address one of the concerns that we identified.
	Broadly, we seek in our amendments to address two issues. The first issue relates to the current requirement that REITs distribute 90 per cent. or more of property income, because in the current economic circumstances it is very helpful if companies can retain cash. Credit is clearly difficult to access, and companies need to build up balance sheets—in particular, to keep banks lending to them. If and when the property market picks up, a REIT with sufficient cash might be able to make several acquisitions.
	Amendment 17 seeks to address the issue of a mandatory distribution of 90 per cent., which has to be done in one year, by deferring it for four years. It would be only a temporary measure, and any profits arising in accounting periods ending after 31 March 2010 would be subject to the current distribution rules, but it would provide REITs with flexibility.
	Amendment 18 would provide for distributions to be paid by new shares rather than by cash, and there should not be a revenue implication: shareholders receiving a stock dividend, which is a distribution for these purposes, would be automatically subject to tax, as they would be with a normal property income distribution in cash. We therefore press the Government to look sympathetically at the amendment.
	Amendment 16 is a less radical proposal, but it addresses the same area and would retain the 90 per cent. test. Any breach of it would not result in the risk of expulsion from the REIT regime, as that would be expensive for the REIT, but would involve corporation tax being paid on the undistributed profits. The argument that the Government tend to make against all such proposals is that there is an issue of investor protection, but when institutions are looking for investors to invest in a REIT, there is strong commercial pressure to make use of such provisions only when necessary. It is a commercial judgment that, one might strongly argue, could be left to the REITs rather than to the regulations, so we would be grateful for the Government's response to those points.
	The second issue relates to the profit-financing cost ratio. Property income distributions are subject to a withholding tax of 20 per cent., unless the recipient is a UK charity, pension fund or corporate. Payments of interest by a REIT, however, may not be subject to withholding tax, and there is therefore the clear possibility of a REIT distributing income through interest payments as an avoidance measure. The profit-financing cost ratio is an attempt to address that. It is an anti-avoidance provision aimed at preventing REIT investors from structuring their investment as a loan.
	Broadly, the PFCR rule provides that the amount of a REIT's tax-exempt profits must be at least 1.25 times the size of the financing costs that are related to the REIT's tax-exempt business. There are, however, a couple of problems with that. First, a REIT might hedge market value movements in a debt with a derivative contract. The PFCR rule does not take into account any profit on debt, but it does take into account a matching loss on the derivative. The loss is counted as a financing cost so the REIT might breach the ratio as a consequence of market movements.
	Secondly, the aggregate of all movements in a derivative contract is deferred until closing out occurs, and that could lead to a distortion of the ratio in one particular year. Amendment 15 seeks to address those specific problems.
	As I mentioned earlier, Government amendment 47 addresses the issue of the profit-financing cost ratio by allowing HMRC to waive rules in particular circumstances—when a REIT is in severe financial difficulties, the circumstances arose unexpectedly and the company could not reasonably have taken avoidance action. I have communicated with the British Property Federation, which welcomes movement on the issue but is concerned that the particular circumstances that I have mentioned are somewhat restrictive, difficult to interpret and vague.
	As a consequence, Government amendment 47 may not be effective enough in addressing what both sides of the House agree is a potential problem. I would welcome comments from the Minister on that, because we think that amendment 15 would provide REITs with greater certainty and clarity and address the specific problems raised by the British Property Federation, rather than having the apparently broader flexibility involved in HMRC's waiving the ratio, although in restricted circumstances that would be difficult for the REIT to understand. The Minister may well be able to provide guidance and clarity on the issue; as it stands, however, we are not sure that Government amendment 47 is as successful as amendment 15.

Ian Pearson: We believe that Government amendment 47 will be effective, and I shall explain why in a moment. As the hon. Gentleman will know, the British Property Federation and others have welcomed the amendment, which has arisen as a result of continued discussion with the industry in the post-Budget period. It makes a further change to the regime to ensure that its rules on financing costs achieve their original objectives without creating any unintended effects.
	Government amendment 47 will allow the charge to tax to be waived when the commissioners of Her Majesty's Revenue and Customs think that a company is in severe financial difficulties and that it could not reasonably have avoided breaching the profit-financing cost ratio owing to unexpected circumstances. That ensures that the tax charge can be waived if a REIT that has not borrowed excessively breaches the profit-financing cost ratio because of a fall in its profits and/or an increase in its financing costs that have led it into severe financial difficulties.
	The amendment does not seek to define "severe financial difficulties". However, in case extra clarity should be needed, it provides HMRC with a power that may be used to specify in regulations criteria to be applied by commissioners in determining whether to waive the charge. The hon. Gentleman will be aware that currently there are 21 companies in the REITs regime. We believe that that number is manageable. However, if "severe financial difficulties" needs to be defined, the powers are there. We believe, however, that the phrase is pretty broadly understood.
	Opposition amendment 15 would relax the requirements of the profit-financing cost ratio by bringing in credits in respect of debtor relationships and by excluding financing costs that are considered
	"exceptional due to their size or incidence."
	However, it is not clear to the Government why the size or incidence of a financing cost should be considered to make it exceptional and why that would make it an appropriate item to exclude from the profit-financing cost ratio. We also believe that the Government amendment, by seeking to protect the ratio while ensuring that it does not lead to any unintended consequences for companies in severe financial difficulties, is a more targeted and preferred measure.
	Amendment 16 concerns the requirement of the REIT to distribute 90 per cent. of its profits from the property rental business to shareholders by way of a dividend. That helps to protect the investor and the Exchequer by ensuring that profits are distributed to shareholders who pay tax on them. The amendment seeks to ensure that if a company in financial difficulty fails to meet this distribution requirement it would not be treated as a "serious breach" of REITs rules. REITs legislation states that the consequences of multiple serious breaches of the rules are that REIT may be given notice by HMC to leave the regime. In the context of the distribution requirements, "serious" is not defined. However, if a company is in financial difficulties there is scope under the legislation for that to be taken into account in deciding whether to issue a termination notice. We therefore believe that there is no need for the amendment.
	Amendment 17 also relates to the 90 per cent. distribution requirement. Its purpose would be to allow a REIT to issue stock, instead of cash, in order to meet the 90 per cent. requirement. Allowing a REIT to issue stock, rather than cash, as part of this requirement could risk harming the investor, particularly if stock is issued to shareholders on a mandatory basis. A mandatory issue of stock as part of the distribution requirement would reduce the size of the cash dividend received by each shareholder without increasing the value of their shareholding. There would also be a risk of imposing a tax charge on shareholders that could not be covered by the cash part of the distribution. If stock is issued on an optional basis, those electing to receive cash could still see their shareholding diluted by those electing to receive stock. However, I understand the point that the hon. Gentleman makes, and I can say in response that officials will continue to meet those in the industry to discuss this issue.
	Amendment 18 is intended to provide REITs with an extra three years to distribute the profits from their property rental business. We cannot accept the amendment because we believe that allowing REITs an extra three years to make these distributions would harm the Exchequer and investors, many of whom have invested in REITs because of the expectation that they will receive frequent distributions.
	Government amendment 47 takes a targeted approach, and it has been welcomed by the property industry. We cannot accept the Opposition amendments, but we will continue to keep the regime under review and remain in dialogue with the industry on these issues.

David Gauke: I am grateful to the Minister for his comments about continuing to look at the stock dividend issue. I am still not entirely convinced by his view that his amendment is better than ours, but we should be grateful that we at least have an amendment. I beg to ask leave to withdraw the amendment.
	 Amendment, by leave, withdrawn.
	 Amendment made: 47, page 290, line 24, at end insert—
	 'Profit: financing-cost ratio
	5A (1) In section 115 (profit: financing-cost ratio), after subsection (3) insert—
	"(3A) The Commissioners for Her Majesty's Revenue and Customs may waive a charge in respect of an accounting period where they think that—
	(a) the company was in severe financial difficulties at a time in the accounting period,
	(b) the result of the sum specified in subsection (2) is less than 1.25 in respect of the accounting period because of circumstances that arose unexpectedly, and
	(c) in those circumstances, the company could not reasonably have taken action to avoid the result being less than 1.25.
	(3B) The regulations may specify criteria to be applied by the Commissioners in determining whether to waive a charge."
	(2) The Commissioners may waive a charge in respect of accounting periods ending before the day on which this Act is passed.'.— (Ian Pearson.)

Schedule 35
	 — 
	Pensions: special annual allowance charge

Stephen Timms: I beg to move amendment 48, page 291, line 28, at end insert '(but subject to paragraph 16A).'.

Mr. Deputy Speaker: With this it will be convenient to discuss the following: Amendment 29, page 293, line 4, leave out subsection (2).
	Amendment 30, page 295, line 46, at end insert—
	'(3) When an individual establishes a protected pension input amount in respect of any of the schemes listed in paragraphs 8 to 13 below and their arrangements change, the protected input amount applies to the new arrangement.'.
	Amendment 25, page 296, line 25, at end insert—
	'(3A) Where contributions are not paid in accordance with subsection 3(c) above, the protected pension input amount is the lower of £50,000 or the average of contributions made over the last three years.'.
	Amendment 26, line 297, line 23, at end insert—
	'(3A) Where contributions are not paid in accordance with subsection 3(c) above, the protected pension input amount is the lower of £50,000 or the average of contributions made over the last three years.'.
	Amendment 27, page 298, line 25, at end insert—
	'(3A) Where contributions are not paid in accordance with subsection 3(c) above, the protected pension input amount is the lower of £50,000 or the average of contributions made over the last three years.'.
	Amendment 28, page 299, line 15, at end insert—
	'(2A) Where contributions are not paid in accordance with subsection 2(b) above, the protected pension input amount is the lower of £50,000 or the average of contributions made over the last three years.'.
	Government amendments 49 and 50.

Stephen Timms: In the Budget, we announced a restriction of higher rate tax relief for the pension contributions of people with the highest incomes from April 2011. The House well understands why we had to introduce anti-forestalling rules in the meantime to protect an estimated £2 billion of tax that could have been at risk otherwise. The arrangements were designed to be fiscally neutral in the interim period between Budget day and April 2011. The principle that we adopted was to maintain higher-rate relief for continuing regular pension contributions over this interim period but to restrict the relief when contributions were additional to the regular pattern.
	We have defined regular contributions as those made quarterly or more frequently—an established pattern of pension savings where it is readily possible to identify the typical level of contributions. The level is also likely to be consistent, as part of a contract with an employer or with a pension scheme direct, so it is relatively easy to isolate forestalling as distinct from normal pension saving. It is harder to identify as "normal" contributions that are made less frequently, particularly when that requires looking back over previous years, not least because the A-day changes made three years ago have altered pension saving habits. Irregular contributors have a much more limited track record on which to base judgments on typical levels of contributions, and the payments tend to vary more in size.
	Many self-employed people and others, particularly those with personal pensions, make annual contributions or contribute on a more ad hoc basis as their circumstances allow, and we did not want to damage their interests. The regime includes an annual savings limit of £20,000 on which people are entitled to receive higher-rate relief. For some people—a relatively small group—£20,000 will be less than they have tended to contribute to their pension in the years since A-day. Incidentally, it will often be more than they could have contributed before A-day, but not since.
	In my written ministerial statement on Budget day and in our debate in Committee, I acknowledged that difficulty and made it clear that I wanted to consider how best to protect annual contributors alongside more frequent contributors, without risking large additional Exchequer losses. So we have Government amendments 48, 49 and 50, providing that if irregular contributions have been made over the past three years, the special annual allowance will be increased to the average of those contributions, but with an upper limit of £30,000.
	The approach in the Government amendments is similar to that in Opposition amendments 25 to 28, which likewise refer to average contributions from the past three years and would set an upper limit. I welcome the Opposition's support for that approach. The difference between us, not surprisingly, is what the limit should be. The Government amendments set it at £30,000 while the Opposition amendments suggest £50,000.
	The majority of people contributing on a non-regular basis had average contributions below the £20,000 level and so will be fully protected. Of those whose average contributions exceed that level, many are not far above it. We estimate that setting the limit at £30,000 will extend full protection to many annual contributors and to more than three quarters of all those affected. Only the highest quarter of contributors will be constrained at all, and they will see their limit for higher-rate pensions tax relief increased by half as much again, so they, too, will benefit.
	I suggest to the House that the £30,000 level is sensible and will bring the costs of the anti-forestalling regime down to an additional £70 million over the next two years—more than would have been the case without the relaxation, but an affordable level. Setting the level at £50,000, on the other hand, would raise costs by £130 million, nearly twice as much. The Opposition amendments would also potentially, though I imagine unintentionally, open a loophole for people with several pensions to have an annual limit of £50,000 on each. This is a difficult area, but I hope that Opposition Members will feel able not to press their amendments and to support ours instead.
	I wish to say a word about the other Opposition amendments, which have not yet been spoken to. On amendment 30, I have received representations on the subject of flexibility for those who change provider. I have thought about it, and I accept that we can be more flexible so that if somebody changes pension provider and carries forward exactly the same pension arrangements, they can retain their protected pension contributions. There is a risk, though, of inadvertently opening up significant avoidance. I would therefore like to take the matter forward through regulations, after consulting the industry on draft regulations. I accept the argument that lies behind the amendment, but I hope that on the understanding that I want to deliver that aim, the Opposition will not press it.
	One matter not covered by the amendments has been raised with me, which is that the rules on the commencement dates for the anti-forestalling regime are too stringent with regard to the treatment of those who set up new pension arrangements on or just before Budget day. There is scope there, too, to be helpful, and we will discuss the matter with providers and make any change necessary through regulations.
	If, as suggested in the Opposition's amendment 29, the income test applied only to the current tax year as opposed to the previous three, that would give people whose income is more than £150,000 a big incentive to reduce it below that level for the two years to which the anti-forestalling legislation will apply. People in that income bracket are often in a position to renegotiate their pay to delay taking income into a later tax year. Removing the three-year rule would put at risk a significant amount of tax revenue—we estimate that it could be £100 million in the two years to April 2011. It is important to bear it in mind that, for the majority of pension savers—98.5 per cent.—schedule 35 changes nothing.
	I hope that hon. Members will welcome the Government amendments and that Opposition Members will not be inclined to press their alternative amendments.

Mark Hoban: Schedule 35 has caused much concern to many people, including pension providers and the self-employed. They are concerned about the hasty way in which it was introduced, without consultation, the rough edges that it creates and its discrimination against people who do not make regular contributions—quarterly or more frequently. People have made many representations and sought ways of amending the schedule so that the rules apply more reasonably.
	The Financial Secretary, today and in Committee, emphasised a willingness to get the schedule right. However, he tempered that from time to time with a focus on the Revenue cost. He argued today and in Committee that some people are in a position to renegotiate their contracts to alter their package, thus taking advantage of amendment 29. However, some people who earn relatively low sums of money this year will have earned a large sum in the first year. I had an e-mail from a member of the public who earned little in the past two years but suddenly landed a contract this year and earned more than £150,000.  [Interruption.] He may well have e-mailed other Members, too. That is the joy of e-mailing prolifically. Other examples have been given of other people who have received income in lumps. I want to ensure that the Government, in their pursuit of tax avoidance, do not create too many rough edges in the scheme so that people who are not in a position to manipulate their tax affairs lose out. That is why I tabled amendment 29.
	I am grateful to the Financial Secretary for recognising the strength of the arguments behind amendment 30. Several people have mentioned not only a change in the provider of the scheme—obviously people do not want to lose the benefit of protection under the scheme if the business for which they work decides to change pension provider—but what happens when the scheme itself changes. I wonder whether the Financial Secretary could reassure me by saying that he will deal with that through regulation or that it is already covered in the schedule. It would be helpful if he listened to me rather than his neighbour.
	We know that several large employers are closing down their defined benefit schemes and moving to defined contribution schemes. I had an e-mail from someone who was in a defined benefit scheme and was concerned that they would lose the benefit of the protected pension input amount provisions in schedule 35. Could the Financial Secretary say a little about how people in that situation would be protected? If someone remains in the same employment, with the same broad employment package, but the employer closes down the DB scheme and the employee is therefore forced to move to a DC scheme, will the protection remain? Given the changes that are likely to happen in the next couple of years and the number of DB schemes that are closing, that will be of interest to many people.
	Let me turn now to amendments 25 to 28. I welcome the fact that the Government's thinking has moved. In Committee we looked at either increasing the special allowance from £20,000 to £50,000 across the board or averaging the previous year's contributions. We decided that we wanted to take a hybrid approach, and clearly the Treasury has been thinking along the same lines. We welcome the fact that the Government have moved some of the way, by introducing a £30,000 limit, which is not where I thought they were heading in Committee, when I thought that they were considering simply keeping the £20,000 limit. However, I am still not convinced that they have moved far enough in recognising the difficulties for those who are self-employed who make irregular contributions to their pension funds. I would have preferred a more generous limit, although I take on board the Minister's comments about the cost of the £50,000 limit compared with the cost of the £30,000 limit.
	In conclusion, I will not press amendments 29 or 30 to a vote. I am pleased that the Government have taken on board the thrust of amendment 30 and come up with a more elegant and cheaper version of amendments 25 to 28. If the Minister had tabled those amendments rather sooner than the Friday before debating them, I might have tabled a more elegant amendment of my own to change £30,000 to £50,000. However, the Government have moved somewhat, thanks to the pressure from both inside and outside this House. I do not think that the proposed measure is perfect by any stretch of the imagination. Some people will still suffer from the sharp edges that the proposed anti-forestalling measure will introduce, but schedule 35 is certainly in better shape than it was when the Finance Bill was published a few months ago.
	 Amendment 48 agreed to.
	 Amendments made: 49, page 302, line 41, at end insert—
	 'Increased special annual allowance
	16A (1) This paragraph has effect where the mean of the infrequent money purchase contributions amount for the tax years 2006-07, 2007-08 and 2008-09 ("the relevant mean") exceeds £20,000.
	(2) Where the relevant mean is less than £30,000, this Schedule has effect as if the references in paragraph 1(4) and (5) to £20,000 were instead to the relevant mean.
	(3) Where the relevant mean is £30,000 or more, this Schedule has effect as if those references were instead to £30,000.
	(4) The "infrequent money purchase contributions amount" for a tax year is the aggregate of any relevant contributions paid in the tax year—
	(a) under money purchase arrangements, other than cash balance arrangements, under registered pension schemes, and
	(b) less frequently than on a quarterly basis;
	(and so is nil if no such contributions were so paid).
	(5) But if the infrequent money purchase contributions amount for a tax year would otherwise be greater than the annual allowance for the tax year, it is to be taken to be the annual allowance for the tax year.
	(6) "Relevant contributions" means contributions which are—
	(a) relievable pension contributions by or on behalf of the individual, or
	(b) contributions paid by an employer of the individual in respect of the individual.'.
	Amendment 50, page 303, line 18, leave out 'are members of' and insert—
	'(a) are or have been members of currently-relieved non-UK pension schemes, or
	(b) have been members of overseas pension schemes that were not'.— (Mary Creagh.)

Schedule 48
	 — 
	Extension of information and inspection powers

Amendment made: 8, page 368, line 14, leave out 'Paragraphs (c) and (d) of sub-paragraph 2A do' and insert 'Paragraph (c) of sub-paragraph 2A does'.— (Mr. Gauke.)

Schedule 56
	 — 
	Penalty for failure to make payments on time

Amendment made: 21, page 423, line 14, leave out 'by'.— (Mr. Gauke.)
	 Amendments made: 51, page 425, line 1, leave out from beginning to 'P' in line 2.
	Amendment 52, page 425, line 4, leave out 'whether before or after that date,'.
	Amendment 53, page 425, line 6, leave out 'during' and insert
	'between the date on which P makes the request and the end of'.— (Mary Creagh.)
	 Third Reading

Stephen Timms: I beg to move, That the Bill be now read the Third time.
	Let me begin by thanking all hon. Members who have participated in the various stages of this Bill, from Second Reading in early May through to the Committee stage, which all of us who were involved hugely enjoyed, and to debates yesterday and today on Report. The Bill has benefited in a number of respects from the scrutiny that it has received.
	The world economy is experiencing the worst conditions for generations. We are taking action to help families and businesses so that we can come through the downturn sooner and stronger. The Bill introduces measures to support the economy and the public finances, and measures to continue the modernisation of the tax system. Together with other policies across Government, it will help to put Britain firmly on the path to recovery.
	Help is needed to support the economy through the current problems, and the Bill will help to implement the temporary VAT cut until the end of the year—a fiscal stimulus of more than £11 billion into the economy that has supported households, from those on higher incomes to those receiving benefits. Businesses also benefit from additional household spending. In addition, the exempt sector—including charities and financial services, health and education—is benefiting directly from lower VAT costs. There has been growing recognition that the measure is working.
	The freeze in the small companies' rate of corporation tax will help more than 800,000 companies. The temporary extension of the loss carry-back rules, benefiting more than 140,000 businesses, will help many viable firms that face cash-flow difficulties. The Bill is helping to support investment by temporarily doubling, to 40 per cent., capital allowances for businesses investing now. That will benefit a further 60,000 businesses, together with the business payment support scheme, as part of which 160,000 agreements have already been reached with business, deferring tax payments of £2.7 billion.
	The Bill provides real help for businesses now, targeting it at those in most need while encouraging investment for growth in the future. It also introduces measures to support the public finances through the medium term, which is a critically important task for us to accomplish. It tackles the challenges faced by the economy, but also provides for changes that will support businesses and individuals in the medium term. The high level of consultation, both formal and informal, that we carried out in preparing the Bill is reflected in the World Bank's "Doing Business 2009" survey, which ranks the UK sixth in the world for ease of doing business. The measures in the Bill are good for individuals, good for business and good for the economy as a whole. I commend the Bill to the House.

Mark Hoban: I wish that I could talk about the Bill with the same degree of conviction as the Financial Secretary. He has referred to what appeared to be a cornucopia of goodies, but I have to say that this has been a relatively uncontroversial Finance Bill. It has ducked the main issues. Although we have the legislation to establish the 50p rate, the measure to set the rate is deferred to another day; there are measures aimed at fiscal consolidation, such as the anti-forestalling measures on pension contributions, but the increase in national insurance contributions announced in the pre-Budget report is not in the Bill. That has rather limited the areas of heated debate between those on the two Front Benches.
	As ever with Finance Bills, the areas of controversy have been principally those on which the Government have not consulted beforehand—the measures that were slipped into the Bill in the days and hours leading up to the Budget. We have had debates about the role of senior accounting officers, and about pensions anti-forestalling rules, for example. In both areas the Government have been widely criticised for failing to consult industry. That lack of consultation undermines the competitiveness of the tax system and creates uncertainty for businesses. It sends out a message that businesses cannot be sure that measures announced in the pre-Budget report represent the full sum of the technical measures to be introduced in the Finance Bill. That causes business a great deal of concern.
	Once the Government had bunged those measures into the Bill, they had to retreat and listen to the forceful arguments put forward by us and by those outside the House. That is why, to reflect some of those concerns, we have seen amendments tabled in Committee and on Report. We have made the Government see the merits of allowing people who make irregular contributions to their pension scheme to receive higher-rate tax relief on their contributions. We have forced the Government to modify the rules on senior accounting officers in a way that leads us to ask what the measure is actually for. Will it simply impose additional costs on business but bring in no real return to HMRC?
	Those are not the only areas in which the Government have been prepared to listen. My hon. Friends the Members for South-West Hertfordshire (Mr. Gauke) and for Hammersmith and Fulham (Mr. Hands) have either had amendments accepted by the Government or provided the inspiration for amendments that have been accepted. The Government might say that that shows that they are a listening Government, but it also demonstrates the value of consultation and discussion, as opposed to acting first and thinking later.
	The Bill also demonstrates a lack of political will on the part of the Government, and a failure to push forward with difficult reforms. They have abandoned proposals for a per-plane duty as a replacement for air passenger duty. With political will, those proposals could have worked; instead the Government have introduced banded air passenger duty, which will affect many from the Caribbean community who will end up paying more for their flights. A lack of nerve has meant that sensible environmental tax changes have been abandoned.
	There are measures in the Bill that we commend. The reforms to the taxation of foreign profits should make Britain a more attractive place to do business. I hope that it will stem the outflow of businesses from the UK seeking to re-domicile their headquarters overseas, but it should be a salutary reminder to the Government that they cannot afford to neglect the competitiveness of the UK's tax system. That is why my hon. Friend the Member for South-West Hertfordshire tabled a new clause asking the Government to produce an annual report on the measure. Government neglect of the competitiveness of the UK tax system not only risks businesses from this country moving elsewhere, but acts as a barrier to the inward investment that we will need to restart the economy when the recession is over. Businesses are mobile and tax competition can erode our tax base as businesses move overseas, forcing tax rates to go up.
	I have referred to measures introduced to deal with the taxation of foreign profits, and the new debt cap rules were part of that package. A number of representations have been made about the detail and the practical impact of those rules. A number of people have expressed the concern that there is a risk of incentivising debt at the expense of international businesses that use their own resources to fund inward investment.
	Our debate on dividend exemption demonstrated the increasing influence of the EU on our tax affairs, as rules on the free movement of capital and establishment now make it difficult to have rules that favour UK companies. It was because of a threat from the EU that the dividend exemption rules dictate that dividends from UK companies are not automatically exempt. That is a retrograde step for UK companies that were previously used to having all their dividends and distributions automatically exempted.
	Despite the Finance Bill running to 448 pages, there were only three measures on tax simplification. At a time when we need to reduce the burden on businesses, we should be seeking more opportunities to reduce the complexity of legislation and the costs of compliance.
	There were few controversial issues for the Committee to get its teeth into. Difficult decisions, as with so many other areas of this Government's policy, have been kicked into the long grass. At a time when the tax system needs reform to help businesses, to support families and to adjust to the realities of modern business, the Bill does little to address the challenges that lie ahead. This is a Bill from a Government who have run out of steam, run out of ideas and run out of road—no big arguments, no big ideas.

Jeremy Browne: The Finance Bill is an inevitably enormous piece of legislation that is rightly subjected to many months of scrutiny both in Committee and on the Floor of the House. It has been a privilege to get to know the other hon. Members who have scrutinised the Bill with a degree of detail and to come to understand better their qualities—and occasionally, as in my own case, limitations. We have all got to know each other better and I hope that we have all subjected the Bill to a suitable level of scrutiny.
	I would like to take this opportunity to thank a few people: Hanneke Hart, my master researcher, without whose efforts I would not have been as well equipped to try to hold the Government to account; Madeline Lewis from PricewaterhouseCoopers and John Whiting, formerly of that organisation, have been very helpful; and my hon. Friends the Members for South-East Cornwall (Mr. Breed) and for Southport (Dr. Pugh) have shouldered the burden of the many hours of scrutiny that we have undertaken.
	The backdrop to this Bill is the ruinous state of the public finances. As a country, we are borrowing an extra £480 million every single day—a level of borrowing that is without precedent and clearly unsustainable in anything more than the fairly short term. That big backdrop required a Government who had big, bold measures in order to address the magnitude of the situation. Instead, we were given a very small Finance Bill containing many micro-proposals. In the last few days, for example, we have discussed a small above-inflation increase in the duty on beer at a time when pubs are closing, breweries are struggling and beer consumption is falling. The amount of extra revenue raised will be tiny, if it exists at all. Only this afternoon, we discussed further punitive measures affecting the bingo industry at a time when bingo halls are closing. Again, the amount of extra revenue will be tiny, if any money is raised at all.
	The Minister talked of the VAT cut. The Bill enabled us to extend it by one extra month: that is another timid measure. Even the measures that have been sold to the public as big, headline, dividing-line issues, such as the 50p income tax rate—a broken Labour manifesto promise—turn out, when subjected to closer scrutiny, to be raising very little money in the grand scheme of things, and possibly no additional revenue at all.
	The sad conclusion that we must reach after several months of detailed scrutiny is that this Government are exhausted, and that what is needed is a fresh start with innovative ideas and bold leadership for our country.

Stewart Hosie: As the Minister said, the Bill extends the temporary VAT cut. He suggested that there was evidence that it is working. Even now, at the stage of this short Third Reading debate, there is still extraordinary denial. The temporary VAT cut will protect fewer than half the number of jobs that the same amount of money would have protected had it gone into direct capital investment. The tragedy is that with debt approaching £1.6 trillion, with net investment due to fall from £44 billion to £22 billion and with employment rising—we have seen the largest-ever single monthly rise this year—all that we are seeing is tinkering around the edges.
	I will not detain the House further, but I agree with the other Front-Bench spokesmen that this is a Bill from a Government who have clearly hit the buffers.
	 Question put and agreed to.
	 Bill accordingly read the Third time and passed .

Business without Debate
	 — 
	delegated legislation

Mr. Deputy Speaker: With the leave of the House, we shall take motions 3 to 6 together.
	 Motion made, and Question put forthwith (Standing Order No. 118(6)),

Pensions

That the draft Financial Assistance Scheme (Miscellaneous Provisions) Regulations 2009, which were laid before this House on 16 June, be approved

Legal Services Commission

That the draft Criminal Defence Service (Provisional Representation Orders) Regulations 2009, which were laid before this House on 10 June, be approved.

Criminal Law

That the draft Criminal Justice and Immigration Act 2008 (Violent Offender Orders) (Notification Requirements) Regulations 2009, which were laid before this House on 9 June, be approved.

Children and Young Persons

That the draft Children Act 1989 (Higher Education Bursary) (England) Regulations 2009, which were laid before this House on 16 June, be approved. —(Mark Tami.)
	 Question agreed to.

Select Committee on Reform of the House of Commons

Motion made,
	(1) That a Select Committee be appointed to consider and make recommendations on the following matters:
	(a) the appointment of members and chairmen of select committees;
	(b) scheduling business in the House;
	(c) enabling the public to initiate debates and proceedings in the House; and
	(d) such other matters as appear to the Committee to be closely connected with the matters set out above, and to report on these matters by 13 November 2009;
	(2) That the Committee also consider such other matters as may be referred to it from time to time;
	(3) That the Committee consist of eighteen Members;
	(4) That Mr Graham Allen, Mr Clive Betts, Mr Graham Brady, Mr David Clelland, Mr David Drew, Natascha Engel, Dr Evan Harris, David Howarth, Mr Michael Jack, Mr Greg Knight, Mr Elfyn Llwyd, Mr Chris Mullin, Dr Nick Palmer, Martin Salter, Dr Phyllis Starkey, Mr Andrew Tyrie, Dr Tony Wright and Sir George Young be members of the Committee;
	(5) That Dr Tony Wright be Chairman of the Committee;
	(6) That the Committee have power to send for persons, papers and records, to sit notwithstanding any adjournment of the House; to adjourn from place to place, to report from time to time and to appoint specialist advisers;
	(7) That this Order be a Standing Order of the House until the end of the present Parliament.—( Mark Tami.)

Hon. Members: Object.

Taxation of Pensions

Motion made, and Question proposed, That this House do now adjourn. —(Mark Tami.)

Barry Gardiner: The debate has come about because of an unexpected reduction in the available pension commencement lump sum suffered by one of my constituents, whom I shall refer to simply as Dr. Robert, after he retired. I have corresponded with the Treasury about the matter, and I would not normally seek to detain the House by debating an issue that might otherwise be handled by means of an exchange of letters with the Minister. I do so on this occasion for the following reasons.
	First, Dr. Robert's case has exposed what I believe to be an anomaly in schedule 29 of the Finance Act 2004 as it relates to tax-free pension lump sum allowances. His case cannot, therefore, be remedied at an individual level; it can only be remedied by the will of the House in future legislation. Secondly, although the majority of pensioners will not have been affected by the injustice that I believe Dr. Robert has suffered, his case is far from unique. While I suspect that very few who have been affected by the anomaly in the regulations will have been able to articulate the fact with the same mathematical clarity as my constituent, they will have felt no less bewildered and cheated than he has.
	My third reason for raising the matter in the House is that in his letter to me of 19 November last year, my hon. Friend the Economic Secretary to the Treasury acknowledged the real problems that had been created by the lump sum rule. He even acknowledged that my constituent had proposed
	"solutions that overcome these effects by taking account of the actual amounts of pension commencement lump sum paid in each case."
	Unfortunately, the letter proceeded to justify not adopting those solutions on the grounds that they would add administrative complexity. That cannot be right; injustice cannot be excused on the basis of administrative convenience.
	Having set out my reasons for bringing the matter before the House, I must now present the detailed arguments relating to the tax rules. I apologise in advance that they are necessarily technical and complicated, but I will try to reconcile simplicity with accuracy as best I can.
	Since what the Government chose to call A-day, 6 April 2006, there has been a lifetime allowance, known as an LTA, of £1.5 million. That is the limit imposed not on an individual's pension fund itself, but on that element of the cumulative pension fund from which an individual can withdraw or crystallise a lump sum without incurring a lifetime allowance charge. The figures are indexed each year, but if we talk in 2006 money, an individual is entitled to take a tax-free lump sum called a pension commencement lump sum, or PCLS, of up to £375,000, which is 25 per cent. of the standard LTA of £1.5 million.
	My constituent had a pension in progress at A-day that had a capital value of £250,000, with 25 per cent. crystallised lump sum rights of £62,500. He also had an NHS pension with a capital value of £1.2 million, where, under the NHS scheme, the lump sum entitlement was limited to 13.04 per cent. rather than the Government figure of 25 per cent. He also had four other uncrystallised pension funds totalling £580,000 in capital value, and a scheme lump sum entitlement of 20 per cent. amounting to £145,000. Finally, he had a post-1987 freestanding additional voluntary contribution scheme worth £60,000. That scheme, although allowing him to take a lump sum of £25,000, would under Treasury rules not be allowed to count as part of his VULSR, which is Treasury-speak for valuation of uncrystallised lump sum rights, and could therefore not be calculated towards the total lump sum rights minimum figure of £375,000, at which point he could register for primary or enhanced lump sum protection in accordance with RPSM03105070.
	Dr. Robert registered for enhanced—dormant primary—transitional protection of his LTA. His declared LTA if needed later for primary protection was 139.33 per cent., which equates to £2.09 million rather than the £1.5 million. The reason he could not apply for enhanced lump sum protection was that his total lump sum rights on A-day did not quite reach £375,000. We should remember at this point that he had crystallised £62,500 already and had a further £156,480, which represented the 13.04 per cent. of his NHS pension, as well as a further £145,000 which represented 25 per cent. of his four pensions with a capital value of £580,000, and zero from his post-1987 freestanding AVC.
	Dr. Robert chose to crystallise his NHS pension shortly after A-day and received a PCLS of £156,480. When added to his pre-commencement pension, this meant he had used up 96.66 per cent. of a standard LTA. However, because he had registered for enhanced—dormant primary—protection, he knew he had, in fact, got 42.67 per cent. of LTA still remaining. On deciding shortly thereafter to crystallise his four private pension plans, he was told that although he had crystallised only 58.4 per cent. of his available lump sum rights, he could now crystallise only £12,500 tax-free—or 3.34 per cent. of £375,000—before he would exceed his PCLS allowance. The Treasury deemed him to have used up 96.66 per cent. of his tax-free lump sum allowance when, in reality, he has used only 58.4 per cent. of it. The reason for that is because the way in which the lump sum rule operates does not recognise that the amount he could take as a lump sum from his national health service pension was limited to 13.04 per cent. of its capital value.
	The lump sum rule, as defined in schedule 29(2) of the Finance Act 2004, tracks the decrementing "available portion" of PCLS remaining, after "benefit crystallisation events", from an individual's PCLS lump sum entitlement, called the "applicable amount". The "applicable amount" is not the problem here; the problem is in the way the decrementing "available portion" is calculated after each progressive lump sum crystallisation event. The available portion is initially defined in schedule 29(2) and RPSM09104510 by the formula: "available portion" equals the current standard lifetime allowance indexed to the year in question minus the aggregate of amount crystallised—AAC—for each proceeding benefit crystallisation event, all divided by four.
	The rationale behind the formula is that it progressively tracks the decrementing available portion to zero, thus ensuring that no excess PCLS is paid out by pension administrators. However, it makes the extremely unfair assumption that each individual crystallisation that goes to make up the AAC actually represents 25 per cent. of the PCLS. That assumption, represented by the use of four as the divisor in the formula, is simply unfounded, as is shown in the case of Dr. Robert, whose scheme did not allow him to crystallise more than 13.04 per cent.
	Thus far, I am confident that the Exchequer Secretary to the Treasury accepts that what I have said is accurate, both factually and with regard to the calculations. I say that because her officials have acknowledged as much to me in correspondence. A letter from the Economic Secretary to the Treasury expressed it by saying that
	"as the amount deducted from the lifetime allowance is the value of the overall total benefits taken it is possible as"—
	this—
	"case illustrates, for members to get an aggregate pension commencement lump sum of less than 25 per cent. of their aggregate lifetime allowance if one or more of their pension schemes chooses to pay a pension commencement lump sum of less than the 25 per cent. maximum".
	With respect, that is to acknowledge the injustice, but not to remedy it.
	The letter goes on to give an excuse of, "Not my fault, guv," when it says that
	"there is no hindrance in the tax rules preventing the maximum pension commencement lump sums from being paid. It is, quite rightly, a matter between pension schemes and their sponsors and members whether they pay out less than the permitted maximum of 25 per cent."
	That claim might have had a brighter ring to it were it not for the fact that the Government's own civil service pension scheme did not enable full commutation to 25 per cent. until 1 October 2007. Furthermore, the NHS pension authority delayed until 6 April 2008, some two years after A-day.
	Those two pension schemes represent the majority of the UK's public sector employers. In the light of that, I consider the idea that the Government can absolve themselves of a duty to get the lump sum rule right by blaming the pension fund's sponsors as wide of the mark. The Government have a duty to legislate for the world as it is, and as they know it to be, not to put pensioners on some Procrustean bed and chop them to the same size, regardless of the actual rules of their pension fund, especially when the Government operate two such non-compliant funds themselves, employing millions of public sector workers.
	In his letter, my hon. Friend the Economic Secretary declined to resolve the anomaly in the lump sum rule on the grounds that to do so would add administrative complexity. He says:
	"Under the pre-A-day rules pension schemes did not routinely keep details of tax-free retirement lump sums. And post-A-day pension schemes simply pass on details of the unused lifetime allowance available to an individual, and not this information plus details of pension commencement lump sums paid to date."
	I point out that given that HMRC has already had to develop efficient "application for protection" and "event report" schemes, the additional work involved in tracking the actual rather than the assumed PCLS crystallisations of those individuals eligible for an enhanced LTA over their lifetime should not be greater than that already required for those who register lump sum rights greater than £375,000 in respect of primary or enhanced protection.
	My hon. Friend also failed to indicate that pension schemes are also required to maintain precise records of pensions paid, including PCLS, for six years after A-day. Indeed, since A-day, they have been obliged to complete detailed annual electronic returns online to HMRC, using APSS300, which covers 20 wide-ranging event reports pertaining to transfers and payments made from the scheme to individual scheme members. Those events are detailed in RPSM12301010-12301220 and S.I.2006/257. Within APSS300, only event reports 6, 7 and 8 require consideration for the PCLS in relation to the anomaly in the lump sum rule. There is no specific event report at present for a PCLS paid to an individual with enhanced LTA who does not have additional PCLS rights greater than £375,000. A small amendment to the APSS300 reporting requirements of event 6 would go a long way to remedying the anomaly.
	My hon. Friend the Exchequer Secretary has had a long day, and I am conscious that this is a detailed and difficult issue. I know that she is aware of all the technicalities of it, because of the correspondence that I have had with her officials, but I urge her to look again at how a very small change in the rules can prevent a continuing and wide-ranging injustice.

Mr. Deputy Speaker: I now have to announce the result of a question deferred from a previous day on a question relating to justice and security. The Ayes were 421 and the Noes were 64, so the Ayes have it.
	I shall also announce the result of a Division deferred from a previous day on the question relating to identity cards (provision of information without consent). The Ayes were 272 and the Noes were 219, so the Ayes have it.
	I shall also announce the result of a Division deferred from a previous day on the question relating to identity cards (information and code of practice on penalties). The Ayes were 271 and the Noes were 218, so the Ayes have it.
	I shall also announce the result of a Division deferred from a previous day on the question relating to identity cards (fees). The Ayes were 270 and the Noes were 218, so the Ayes have it.
	I shall also announce the result of a Division deferred from a previous day on the question relating to identity cards (application and issue of ID card and notification of changes). The Ayes were 271 and the Noes were 218, so the Ayes have it.
	I shall also announce the result of a Division deferred from a previous day on the question relating to identity cards (prescribed information). The Ayes were 273 and the Noes were 217, so the Ayes have it.
	I shall also announce the result of a Division deferred from a previous day on the question relating to the EU preliminary draft budget 2010. The Ayes were 345 and the Noes were 142, so the Ayes have it.
	 [The Division lis ts  are  published at the end of today's debates.]

Sarah McCarthy-Fry: I congratulate my hon. Friend the Member for Brent, North (Barry Gardiner) on securing this debate and on bringing his constituent's concerns to the attention of the House. I know that his constituent has already been the subject of some highly technical correspondence with HMRC, which, I understand, is ongoing. I do not think that this is the place for that detailed technical discussion of the finer workings of the pension legislation, but it would be helpful if I responded to my hon. Friend by considering the issues in broad terms.
	As my hon. Friend is aware, under the new pension rules a pension scheme member can receive up to 25 per cent. of their pension fund as an initial tax-free lump sum when their pension starts to be paid. The total amount that individuals can save in a pension tax-free is subject to a lifetime allowance, which currently stands at £1.75 million. That limit is a maximum, within which pension funds may decide how best to provide benefits to their members. However, the Government need to ensure that the system is used fairly and remains affordable for the taxpayer, so there are limits on the amount of tax relief available to an individual.
	If there were no limits to the amounts of tax relief available on pension savings, some people might use them as general savings accounts and would put away far more than was necessary simply to provide a retirement income, instead using pensions as a way to avoid income tax. In that case, the cost to the Exchequer in tax relief could be open-ended.
	The cap on the size of tax-free lump sums therefore ensures that the tax relief available for pensions is kept to the level intended by Parliament and allows the Government to monitor the cost of tax relief to the taxpayer. As I said, the lifetime allowance is the maximum tax advantaged pension benefits an individual can accumulate, other than under transitional rules. That limit is an optional maximum, within which pension funds may decide how best to provide benefits to their members.
	When the individual has more than one pension fund, the maximum tax-free lump sum that an individual can take is based on the lower of 25 per cent. of the money held in a particular pension fund and 25 per cent. of the lifetime allowance available. As each pension scheme comes into payment, the lifetime allowance is reduced by the value of the total benefits taken. Therefore, if one pension scheme pays a lump sum of less than 25 per cent., that will mean that the total lump sum from all schemes will be less than 25 per cent. of the value of all the pension funds as no pension can provide a lump sum bigger than 25 per cent. of the funds held by the individual in that scheme.
	A similar issue arises in connection with the enhanced protection rules.

Barry Gardiner: My hon. Friend is absolutely right to make that point. However, does she not consider it wrong that there should be an assumption that runs absolutely counter to the fact of what the actual payment is? Is it not wrong that there should be an assumption that the full 25 per cent. has been paid out when, in many cases, it will not have been?

Sarah McCarthy-Fry: There is not a requirement for schemes to allow 25 per cent—I think that that is where we are getting a bit confused—rather it is the maximum tax-free lump sum permitted in tax rules.

Barry Gardiner: Indeed, that is the case—it is the maximum admissible—but, as my hon. Friend will know, the two pension schemes that I quoted and many others do not allow that and did not allow that. Millions of workers in this country are affected by the limitation of those schemes, and a correction to the regulations could avoid their being penalised.

Sarah McCarthy-Fry: Very few pensioners will have pensions anywhere near the lifetime allowance, and we have to take that fact into account. We must also take into account the fact that it would add complexity, a point that I will develop later. Our rules must balance what will affect a few individuals against the complexity that would affect many more pensioners. The decision about going to the maximum 25 per cent. is a matter for individual pension schemes.
	I sympathise with my hon. Friend's concerns on this matter, but the current rules work well for the vast majority of people. Pension simplification was intended to introduce rules that are simple, clear and certain. Using a scheme upper limit of 25 per cent. achieves that: it benefits pension schemes by reducing administrative burdens, and benefits individuals by making the rules easier to apply.
	The Government considered this issue when drawing up the framework that was eventually introduced on A-day, and it was recognised at the time that some individuals may not be able to claim the full 25 per cent. tax-free lump sum. Alternative methods that attempted to measure the size of multiple pension funds and calculate the relevant 25 per cent. lump sum would require pension schemes to maintain records of pensions savings before A-day. Opting for that method would require a complex and unrealistic approach to valuing pensions. Members would have to obtain or retain the values and dates of payment of all lump sum payments over a period that may be five, 10 or more years before April 2006.
	That would be a costly and time-consuming exercise. Schemes are required to keep records for only six years, and finding that information would be either impossible or costly. Our experience of other pension law, such as trivial commutation, is that such record keeping would represent significant administrative burdens. Most schemes do not have complete records and it would be unrealistic to expect members to provide that information. That is why a simple formula based on a percentage was used.
	It is also important to bear it in mind that the tax rules do not guarantee that the maximum tax-advantaged benefit can always be paid: they simply provide a framework within which a pension scheme and its members are free to order their affairs as they wish. In some circumstances, that will mean that a member will not be able to obtain the maximum tax advantages.
	The legislation deliberately does not prescribe the level of the tax-free lump sum. Instead, it provides a framework within which pension funds and individuals must operate, and that means that pension funds have the freedom to determine the appropriate package of benefits that they offer to their members. Legislating that pension schemes must provide a 25 per cent. lump sum, or allowing individuals to take a higher percentage from one fund to make up a lower percentage from another, would effectively remove the ability for pension funds to manage their affairs.
	There is nothing to stop the maximum lump sum being paid if the member and pension scheme want to reorder their affairs. It is for the pension scheme to decide what benefits it wants to pay and for the individual to decide how to take them, within the framework that the legislation provides.
	As I said, the tax rules have to cater for a large number of individuals and different circumstances. In doing so, they have to balance complexity with catering for different circumstances, and that is what the current lump sum rules do. They are simple, clear and certain, and very generous in allowing most individuals to take the maximum tax-free lump sum that they can. We also have to bear it in mind that we are talking about the tax-free lump sum only, and that the underlying pension is not affected.
	Of course the Government keep all tax policy under review, but the rules cannot cater for all circumstances and it would be unrealistic to change them to try to do so. The Government want to balance fairness and simplicity, and we think that the rules would become overly complicated if they were to accommodate the circumstances of all individuals.
	 Question put and agreed to.
	 House adjourned.

Deferred Divisions

Justice and Security

That the draft Justice and Security (Northern Ireland) Act 2007 (Extension of duration of non-jury trial provisions) Order 2009, which was laid before this House on 8 June, be approved.
	 The House divided: Ayes 421, Noes 64.

Question accordingly agreed to.

Identity cards

That the draft Identity Cards Act 2006 (Provision of Information without Consent) Regulations 2009, which were laid before this House on 6 May, be approved.
	 The House divided: Ayes 272, Noes 219.

Question accordingly agreed to.

Identity Cards

That the draft Identity Cards Act 2006 (Information and Code of Practice on Penalties) Order 2009, which was laid before this House on 6 May, be approved.
	 The House divided: Ayes 271, Noes 218.

Question accordingly agreed to.

Identity Cards

That the draft Identity Cards Act 2006 (Fees) Regulations 2009, which were laid before this House on 6 May, be approved.
	 The House divided: Ayes 270, Noes 218.

Question accordingly agreed to.

Identity Cards

That the draft Identity Cards Act 2006 (Application and Issue of ID Card and Notification of Changes ) Regulations 2009, which were laid before the House on 9 June, be approved.
	 The House divided: Ayes 271, Noes 218.

Question accordingly agreed to.

Identity cards

That the draft Identity Cards Act 2006 (Prescribed Information) Regulations 2009, which were laid before this House on 9 June, be approved.
	 The House divided: Ayes 273, Noes 217.

Question accordingly agreed to.

preliminary Draft budget 2010

That this House takes note of the unnumbered Explanatory Memorandum dated 11 June 2009 from HM Treasury on the Preliminary Draft Budget of the European Communities for the year 2010; and supports the Government's efforts to maintain budget discipline in relation to the budget of the European Communities.
	 The House divided: Ayes 345, Noes 142.

Question accordingly agreed to.